BoJ Governor Kuroda press conference: says it is desireable for currencies to move stably, reflecting economic fundamentals; 2% inflation will not be sustained as energy price hikes fade, more time needed to achieve 2% goal; watching FX moves carefully
POLICY GUIDANCE:
- Says it is appropriate to patiently maintain current powerful monetary easing to support the economy.
- Will not hesitate to ease monetary policy further if necessary.
- BoJ cannot seek an exit from monetary stimulus given the only gradual rise in inflation.
POLICY DIVERGENCE:
- Notes that while Western central banks are normalising policy, BoJ is not in a situation like that given where the economy is at, as well as current price trends.
- Says it is appropriate for Western central banks to tighten policy given higher inflation and their relatively quicker recovery from the pandemic.
- Says there is nothing wrong with diverging monetary policy between Japan and Western nations.
CURRENCY:
- Says it is desireable for currencies to move stably, reflecting economic fundamentals.
- Excessive currency moves seen recently will make it more difficult for businesses to plan.
- Will carefuly watch impact of FX moves on the economy and prices; BoJ must consider negative impact of excessive currency moves.
- Kuroda says he has no comment on specific FX levels; says it is not appropriate to comment on daily FX moves.
- No change that weak yen is positive for overall economy.
- Kuroda does not think that the BoJ's latest policy encourages further yen weakening.
ECONOMY:
- Risks to the economy are skewed to the downside for the time being, but will be balanced thereafter.
- Says economic trends are advancing up.
- Japanese economy has not recovered to pre-pandemic levels.
- The downgrade to Japan's growth projections was in tandem with the IMF's downgrade on the global economy.
- BoJ needs to fully pay attention to risks from Ukraine crisis and COVID infections.
INFLATION:
- 2% inflation will not be sustained as energy price hikes fade; cost-push inflation caused solely by higher raw materials prices, and will not be sustained in the long-term.
- More time is needed to achieve the BoJ's 2% target, in a virtuous cycle of rising corporate profits and wages.
- Rise in raw material costs are leading to downward pressure in prices by bringing negative effects to the economy.
- Short-term inflation expectations are rising, reflecting fuel prices.
- CPI will gradually rise but will remain below 2% even in 2024.
- Says there is no gap between the BoJ and the government on prices; BoJ and government's policy supplement each other.
OPERATIONS/RATES:
- Says the BoJ has clarified fixed-rate operations to ensure upper cap on 10yr yield target, and to ward off speculations in BoJ policy stances based on operation instances.
- Will conduct fixed-rate operations on every business day.
- Decided on consecutive bond buying to avoid speculative moves in the market.
- Says irrational expansion of positions to challenge the 0.25% YCC target likely to cease after BoJ's clarification of fixed-rate operation procedures.
- Kuroda does not think that the fixed-rate opertions greatly shake the market, they help stabilise the market.
- Says it will not be easy to target just short-term rates in guiding policy.
- Says it is inappropriate for Japanese rates to rise above 0.25%, but that does not mean the BoJ wants to reduce bond buying.
- Says YCC policies do not make communication with the market difficult.
28 Apr 2022 - 07:33- Fixed IncomeEconomic Commentary- Source: Newswires
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