BoJ Governor Ueda (post-meeting press conference) says economy gradually picking up, must watch markets carefully, still need to gauge whether prices will rise, not yet confident on sustainable inflation ahead

ECONOMY:

• Economy is gradually picking up.


• Says his remarks that 'even more challenging situation from year-end to next year' was about the general stance in his second year as BoJ governor.


• Japan's consumption has shown some weakness, but does continue to recover overall.

INFLATION:

• BoJ still needs to gauge whether prices will rise ahead.


• Still not in a position to foresee sustainable and stable inflation with any confidence.


• Says that the likelihood of achieving inflation target is slightly higher than before, bit still wants to look at more data.


• Likelihood is that underlying inflation will gradually increase towards target through FY25.


• Ueda wants to particularly look at moves in services prices.


• Food price inflation is finally beyond its peak.


• Rising voices for policy normalisation may be a sign that demand-driven inflation is becoming more evident.


• When asked about impact of inflation on households, says he would call for more patience until monetary easing achieves its target.

WAGES:

• Important to confirm whether prices and wages are in a virtuous cycle, keep scrutinising wage-price virtuous cycle.


• Will place importance to both data and business surveys and interviews to determine strength of wage growth.


• BoJ wants to look at data including wage trends so far, future wage moves and their impact on price inflation.


• Wants to gauge the result of Spring wage negotiations, wants to see if wage growth is strong enough to support consumption.


• Negative real wages are not an obstacle for policy shift if wage outlook points to positive real wages ahead.

FINANCIAL CONDITIONS:

• BoJ must carefully watch financial and FX market moves, and their impact on the Japanese economy and pricing.

BANKS:

• Says that he cannot deny some negative effects of NIRP on financial institutions' profitability.


• Adds that banks are seeing strong profits.

POLICY COORDINATION:

• Will closely communicate with government to conduct appropriate monpol.

INTERNATIONAL MONPOL:

• Says soft landing expectations in the US are rising, this is a positive for Japan's economy.


• Monpol is up to each country to decide, BoJ will conduct policy independently from the Fed.


• Fed moves could have impact on Japan's economy and on FX rates.

GUIDANCE:

• Reiterates that the BoJ will not hesitate to take additional easing actions.


• Says that generally speaking, any policy change could involve an element of surprise. 


• Says it should be possible for the market to forecast BoJ's policy shift, at least to some extent.


• Difficult to present a firm picture on policy exit.


• When it comes to exit from NIRP, says BoJ does not have a detailed picture of what policies would be taken in what order.


• Says accommodative conditions would be maintained for unspecified period of time after lifting of negative rates.


• It can be difficult or confusing for the BoJ to specify the outlook for short-term policy, as the Fed does.


• There are no discussions on taking into account the impact of comapnies' FY earnings (ending March) in the timing of any policy change.


• Says there is not much data before January meeting, little chance for BoJ to say that it will change policy next month.


• Says cannot now decide what policy rates will be adopted after negative rates end.

Analysis details (06:32)

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  RECAP: BoJ maintained policy settings, as expected; maintained forward guidance, yield target, and 1.0% reference rate for 10yr JGB. Decision on YCC was unanimous. Said it will not hesitate to take additional easing measures if necessary. Recap on the policy announcement here.

19 Dec 2023 - 06:30- Fixed IncomeData- Source: Newswires