BoJ Governor Kuroda says will patiently continue powerful easing, will not hesitate to ease policy further if needed; closely watching financial and FX moves

FX:

• BoJ will closely watch financial market moves and their impact on the economy and prices in conjunction with the government.


• BoJ is closely coordinating with the government, attentive to JPY weakening effects on the economy and prices.


• JPY weakening is one-sided, notes there are speculative moves behind weakening JPY.


• Says FX intervention comes under the MoF's jurisdiction, not the BoJ.


• Market participants paying attention to interest rate differentials.


• Weak JPY is not just due to rate differentials.


• Must be vigilant to financial, FX market moves and its impact on economy and prices.


• Rapid yen moves makes it difficult for companies to set business plans.


• Yen weakness is negative for non-manufacturing copanies and SMEs.


• Notes that the JPY is not alone in recent weakening, cites GBP and EUR which are both weaker vs the USD.


• Says he will not comment on the FX outlook; monpol not meant to guide FX rates.


• JPY weakening vs USD has had almost same impact as dollar-denominated raw material inflation.


• Kuroda does not anticipate or expect any government request to tackle JPY weakening.

POLICY STANCE:

• Will patiently continue powerful easing, appropriate to continue easing to support the recovery, as output gap remains negative


• Will maintain accommodative conditions for companies.

QE

• Bond buying is not aimed at monetising government debt.


• Widening allowance band for 10yr yield target would hinder monetary easing effects.

INTEREST RATES:

• BoJ will not raise rates for the time being, is not considering rate hikes.


• Negative rates not having big impact on financial institutions.


• BoJ is trying to limit the negative impact of negative rates on banks.


• There is no need for the BoJ to abolish negative rates just to follow overseas central banks responding to higher inflation rates.

FORWARD GUIDANCE:

• BoJ kept forward guidance unchanged as pandemic impact still in place, but must be vigilant going forward given downside risks to the economy.


• BoJ does not rule out possibility of tweaking forward guidance in the future.


• But there is no need to adjust guidance presently.


• Does not see the need to change forward guidance for about 2-3 years.

INFLATION:

• CPI wil undershoot 2% in next fiscal year.


• Weak JPY, existing raw material inflation, pushing up consumer prices.


• Expects Winter bonuses and next Spring's wage negotiations to bring higher incomes.


• BoJ is closely watching the impact of rising prices on households.


• Japan prices are likely to overshoot BoJ's previous price outlook for this year, but will most likely undershoot next year.


• Wages are rising gradually, reflecting recovery in economy.


• Expects wage growth to accelerate beyond next fiscal year due to tight labour supply.


• Says it is regretable that "% inflation goal has not be stably and sustainably met.

ECONOMY:

• Domestic economy is picking up.


• Notes financing conditions for small companies is improving.


• Notes GDP growth not yet at pre-pandemic levels, Japan still on path towards recovery.


• After he Fed rate hike, BoJ does not see the need to lower Japan's growth projections.

Analysis details (07:36)

• Overnight, the BoJ kept policy settings unchanged, as expected, with rates at -0.10% and QQE with yield curve control maintained to target 10yr JGB yields at around 0%, in a unanimous decision
  

22 Sep 2022 - 07:34- Fixed IncomeData- Source: Newswires