BoJ Governor Ueda (post-meeting press conference) says must patiently continue monetary easing, will not hesitate to ease policy further as needed

YIELD CURVE CONTROL:

• Appropriate to enhance sustainability of easing.


• Today's decision was aimed at making YCC policy more sustainable.


• Control of yields may impact volatility.


• Long-term rates could move beyond the 0.5% cap.


• Will conduct consecutive fixed rate purchases if long-term yields exceed 1.0% to curb the yield jump.


• Not expecting long-term yield to rise to 1.0%, but will consider appropriate steps if interest rates breach 1.0%.


• Will respond to the speed and level of long-term rates if they move beyond 0.5%.


• Will fall behind the curve if BoJ tries to respond to excessive interest rate rise at the time.


• Have expanded room for ability to deal with upward move in interest rates.


• BoJ created the 0.5-1.0% frame in addition to the +/- 0.5% to respond to future risks.


• Says +/- 0.5% is appropriate for longer-term yield level under current economic and price trends.


• Says 1.0% is defined as a 'just-in-case cap'.


• BoJ wants markets to determine longer-term rates, but there should be limits.


• Absolute YCC at 0.5% could have enhanced both effects and side-effects of YCC.


• Cannot say whether the BoJ's JGB buying would decrease due to today's decisions.

INFLATION:

• Stable inflation with wage growth not seen yet.


• Signs of change are emerging from companies' price-setting behaviour.


• There is still distance to achieve 2% inflation target; no chanfe to judgement that achieving 2% inflation goal is distant.


• Drastic changes to FY23 price outlook suggests the outlook in April was possibly underestimated.


• Ueda says he is not confident about the rebound in prices. 


• Downside risks to prices are not negligible - weaker global economy and China pose not so optimistic outlook.


• 2% inflation has already been achieved for some time, but BoJ is not confident about the future rebound, so decided to maintain monetary easing.


• Jump in FY price outlook means that there has been some progress towards inflation goals.


• Policy tweak is possible even if there are no major upward revisions to 24-25 price outlook if the BoJ's confidence improves.

RATES:

• There is still some distance until rate hike from negative short-term interest rates.

FOREX:

• Says BoJ is not targeting FX levels.


• Currency market volatility included as target in today's measures. 

ECONOMY:

• Says economic uncertainty very high.


• Will flexibly respond to uncertainties in the economy.


• If risks materialise, it would be too late to respond.

GENERAL MARKET REMARKS:

• Market is calming down relatively.


• Expectations for US economy to achieve soft-landing have been rising.


• Closely watching rising real estate markets.

STANCE:

• It is appropriate to maintain strong monetary easing.


• Will not hesitate to ease policy further as needed.


• When asked if the BoJ's policy was biased towards tightening, Ueda said this was not the case.


• Says today's decision to enhance flexibility is not that different to a change in policy.


• Not aiming for policy normalisation, rather making YCC more sustainable.

Analysis details (07:33)

• The BoJ kept monetary policy settings unchanged but announced it will guide YCC more flexibly with fixed rate operations for 10yr JGB to be conducted at 1.0% (prev. 50bps). Recap on the decision and statement here.

28 Jul 2023 - 07:33- Fixed IncomeData- Source: Newswires