BoJ Governor Kuroda (post-meeting press conference) says must be vigilant to the impact of FX moves; CPI to undershoot 2% from next year; will not hesitate to ease monpol if needed

FX:

• Must be vigilant to financial and currency market moves and their impact on Japan's economy and prices.


• It is important for currencies to move stably, reflecting fundamentals.


• Yen weakening has been one-sided.


• Rapid JPY moves are negative, and undesirable for Japan's economy, making business planning difficult.


• Says he has no comment on FX interventions.


• Government has taken appropriate steps against excessive FX volatility.


• Does not think weak JPY is an opportunity to achieve inflation target since current inlfation is not stable or sustainable in tandem with wage growth.


• Says BoJ monpol does not target FX rates; says Japan has a history of suffering from the strong yen.

USD:

• FX traders are paying attention to interest rate differentials.


• It is not correct to explain the USD strength only based on interest rate differentials.


• Notes Japan's situation is different from the US and europe, where central banks are tightening rapidly to curb inflation.


• Thinks a severe recession from overseas monetary policy tightening is unlikely, although BoJ must think of the risks given outlook remains uncertain.


• US-Japan interest rate differential has little correlation with USDJPY rate when looking at past levels.

YCC:

• Does not think yield curve control is causing yen to weaken.


• Will continue to pay attention to the lowering of bond market functioning.


• Nobody thinks that YCC has anything in particular to do with the JPY moves against the USD.


• Current YCC formation is appropriate.

INFLATION:

• CPI will undershoot 2% from next fiscal year onwards; cost-push inflation will weaken after the new year.


• Japan is not in a position where it can achieve 2% price growth next FY; it may take time to achieve 2% inflation.


• CPI growth is due to the rise in import prices driven by commodity inflation and a weak yen.


• It is necessary to achieve 2% inflation target in tandem with wage growth.


• Says the distance to the 2% inflation target has gotten somewhat closer.


• BoJ still doesn't see achieving 2% inflation even in FY24.


• Does not think BoJ should abandon inflation-orientated policy.

WAGE GROWTH:

• Wages are rising gradually, and expected to rise further next year.


• Will strive to achieve stable and sustainale inflation involving wage growth.


• Expects the Spring wage talks will bring higher wage growth, due to factors including rising price inflation.


• Says base pay is a more important factor for wage growth; without base pay rise of 3%, inflation of 2% cannot be achieved.


• Says the pass-through from rising import prices is necessary and favourable, but does not warrant sustainable or stable inflation, unless combined with wage growth.

INTEREST RATES:

• Japan's neutral rate depends on the potential growth rate, and that cannot be specified at present.


• Currently, rates are far below the level of neutral.


• BoJ not thinking of interest rate hike, or an exit of easing for the time being.

ECONOMY:

• Japan's economy is still on recovery path from the pandemic.


• Government's upcoming economic stimulus package can push down inflation, with electricity and gas subsidies, and a boost to economic growth.


• Hard to tell how much the government stimulus package will affect currencies.


• Slowdown in gloval economy will weigh on Japanese exports and industrial output.


• Sees Japan's economy continuing to grow despite the slowdown in overseas economies.

OUTLOOK:

• Will not hesitate to ease monpol further if needed.


• Appropriate to continue monetary easing to support the economy, for the time being.

28 Oct 2022 - 07:34- Fixed IncomeData- Source: Newswires