BoJ Governor Ueda (post-meeting press conference) says economy is recovering moderately, will not hesitate to take additional easing if necessary; reiterates that the BoJ needs to patiently continue its easy policy

INFLATION:

• BoJ is yet to foresee inflation achieving 2% in a stable manner


• No change to BoJ view that risk of overestimating inflation is greater than inderestimating it


• Does not yet think that there has been a big jump in inflation expectations since July meeting


• BoJ today discussed that inflation's rate of deceleration has been slower than in July outlook report


• Pace of the fall in inflation seems somewhat slower than forecast in July


• Companies' moves to pass on price hikes are nearing a peak


• Says there are no reasons to worry about the slight rise in longer-term rates since they are in tandem with the rise in inflation expectations

WAGES:

• Wage and price setting behaviour has been more positive recently


• Views the continued contraction in Japan's real wages with concern


• Says households are taking a great hit from falling real incomes


• Corporate profits are largely solid, positive for wage hikes next year


• Strength of wage growth - and its sustainability - is one of the most important factors for the BoJ to judge prices

MORTGAGES:

• Says the macroeconomic impact of slight rise in mortgage rates is limited

OUTLOOK

• Says uncertainty is high over economic and price outlook, as well as FX and financial market outlook


• In October, BoJ will scrutinise various data, including government's gasoline subsidy extension


• Japan's consumption is on a gradual recovery, overall

GLOBAL OUTLOOK:

• US economy is stronger than expected, raises the prospect of a soft landing, but notes the uncertainties surrounding US soft landing expectations


• Sees the Federal Reserve's stance as keeping rates high; says BoJ must be mindful of Fed hiking rates again


• Notes that parts of Europe and China are weak


• On risks from China, says measures taken for the China housing market are appropriate, but BoJ must carefully monitor the impact

MARKET MOVES:

• Says BoJ will watch closely for FX moves that impact the outlook


• Has no specific comment on short-term moves in long-term rates or currencies


• Adds that it is important for FX to move stably, reflecting fundamentals


• Will closely coordinate with the government to monitor FX market and its impact on the economy

GUIDANCE: 

• Will not hesitate to take additional easing measures if necessary


• Reiterates that he said recently that BoJ needs to patiently continue easy policy


• Will mull policy adjustments if price goal is in sight


• Will end YCC and NIRP when BoJ judges that achievement of 2% inflation is in sight


• Could consider ending YCC and modifying NIRP when it judges that the achievement of 2% inflation is in sight


• Not currently in a position to decide on the order of change in policy tools


• Cannot identify what variable would lead to achievement of 2% inflation and end of NIRP


• Short-term rates will be kept until the BoJ has achieved its proce target


• Says BoJ does not have a specific strategy for policy changes after it has achieved 2% inflation


• BoJ wants to achieve 2% inflation by continuing easy policy with help of somewhat high inflation rate driven by rising import prices

Analysis details (07:33)

• Ueda speaks after the BoJ rate decision, where it maintained monetary policy, as expected, with rates kept at -0.1%, whilst it maintained YCC to target 10yr JGBs at 0% with a +/-50bps band, and made no change to forward guidance. Recap on the rate decision here.

22 Sep 2023 - 07:33- Fixed IncomeData- Source: Newswires