Daily Market Update: Stock Futures Gain While BOJ Keeps Interest Rates Unchanged

TLDR

• Bank of Japan maintained interest rates at 0.75% while Japan’s inflation dropped to 2.1% in December from 2.9% in November
• Bitcoin traded flat near $90,000 showing minimal reaction to the BOJ decision and inflation data
• US stock futures climbed Friday with S&P 500 and Nasdaq futures gaining 0.3% after two consecutive sessions of gains
• Japanese yen weakened to 158.70 per dollar while 10-year government bond yields rose to 1.12%
• Core-core inflation remained sticky at 2.9%, suggesting underlying price pressures persist in Japan’s economy

The Bank of Japan kept its benchmark interest rate at 0.75% on Friday in a near-unanimous vote. The decision followed Japan’s report of its first inflation slowdown in four months.

Japan’s headline consumer price index fell to 2.1% in December. This represented a sharp decline from the 2.9% rate recorded in November, according to the Ministry of Internal Affairs and Communications.

Core inflation, which excludes fresh food prices, dropped to 2.4% from 3%. However, core-core inflation remained at 2.9%, down only slightly from November’s 3% reading.

The core-core measure excludes both fresh food and energy prices. Analysts at ING said underlying price pressures remain persistent despite monthly fluctuations from energy subsidy programs.

The central bank raised its growth and inflation forecasts for fiscal years 2025 and 2026. The BOJ pointed to expansionary fiscal policy as support for the higher projections.

Cryptocurrency and Currency Markets

Bitcoin showed little movement after the BOJ announcement. The cryptocurrency traded near $90,000 with prices largely flat over the past 24 hours.

The Japanese yen weakened by just over 0.20% to 158.70 per US dollar. Bitcoin and the yen have displayed a strong positive correlation recently, with a 90-day correlation coefficient of 0.84.

The 10-year Japanese government bond yield rose 3 basis points to 1.12%. The increase reflects trader expectations for continued BOJ rate hikes based on persistent underlying inflation.

Japanese yields had surged to multi-decade highs earlier this week. Concerns about tax cuts promised by political parties ahead of the February election drove the spike.

US Stock Futures Advance

US stock futures climbed Friday morning following two straight sessions of gains. S&P 500 and Nasdaq 100 futures rose around 0.3%.

Dow Jones Industrial Average futures increased 0.1%. The rally continued as investors grew more comfortable with cooling geopolitical tensions.

Intel shares dropped more than 10% in extended trading. The semiconductor company issued a weaker-than-expected outlook for the first quarter.

Bitcoin fell over 4.5% to $88,000 on Tuesday as global yields climbed. Rising Japanese borrowing costs pushed up yields worldwide, creating headwinds for risk assets including stocks and bitcoin.

Gold prices pushed above $4,900 for the first time on record this week. Goldman Sachs raised its gold price forecast to $5,400 by the end of 2026.

The Dow recovered earlier weekly losses and finished slightly higher for the week. The S&P 500 and Nasdaq Composite remained on pace for their second straight weekly declines, down 0.4% and 0.3% respectively.

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