BoJ Governor Ueda says that Japan's economy is to gradually pick up in the coming months; says the likelihood of achieving 2% inflation is rising gradually; must carefully watch financial and FX moves alongside the impact on the economy and prices

PRICES

• The likelihood of achieving 2% inflation is rising gradually.


• BoJ confidence has grown in the achievement in the price target.


• "likelihood of achieving inflation target is rising as we confirmed economy is proceeding based on existing price outlook". 


• Services Prices have increased moderately.


• Chance is steadily rising for the achievement of 2% target.


• Affirms the presence of virtuous cycle of wages and prices.


• Impact of import prices continuing, but has passed its peak.


• "first force" (or cost-push inflation) has passed its peak, while the "second force" (virtuous wage-price cycle) is gradually emerging.


• It is not necessary that output gap must turn positive and then rise in order to achieve the inflation target.


• Some upward factors in services price inflation are temporary, but excluding these factors, BoJ can say it's gradually rising.


• "We have come somewhere far from deflation if you define it as a state of negative inflation rate".

WAGE TALKS

• Labour unions are asking for higher pay at wage talks.


• Have heard encouraging comments from large companies regarding wages - closely watching the outcome of the wage negotiations.


• Want to confirm cycle of wages and prices is in place.


• The number of firms that have decided to hike wages at this year's Spring wage talks is higher than this time last year. 


• Uncertainty is still high about how widespread wage hikes will be, although the uncertainty is not as high as last year.


• Even if real wages are negative and the outlook is positive, a policy change is possible.


• Do not need all small and medium-sized firms to hike wages significantly to allow for policy change.


• "We can make some judgements on wages at smaller firms by looking at other economic data hearing from other companies."

POLICY

• Reiterates BoJ will not hesitate to take additional easing measures if necessary.


• Will examine whether to continue massive monetary easing measures including negative integrate rate policy when BoJ judges the achievement of 2% inflation is in sight.


• "Believe we can avoid major policy discontinuity considering current prices and economic outlook".


• No change in BoJ stance to carefully examine price trends.


• BoJ to examine incoming data at every meeting.


• Cannot quantify how much closer BoJ is to exiting negative interest rate policy.


• Cannot deny there are side-effects to negative interest rate policy.


• Will certainly foresee further rate hikes when exiting negative interest rate policy. 


• Will end NIRP when BoJ judges the achievement of the inflation target is in sight.


• Accommodative conditions will continue for a while. 


• Will have more data at the April policy meeting compared to March.


• Will consider whether to continue buying ETFs when the time comes to exit stimulus policy, and will consider whether to continue ETF buying when achievement of 2% inflation is in sight.


• Consideration on whether to continue ETF buying is a separate issue from whether to sell.


• Will guide policy to avoid major discontinuity in long-term bond buying before and after policy exit.


• 2% inflation target should not be changed so easily.


• Unsure if long-term review of past policy addresses the necessity of 2% inflation target.


• An early rate hike without considering 2% inflation target would have raised risk of return to deflation.


• Monetary policy change is possible when there is no update to quarterly outlook.


• Do not have a pre-conceived order of policy steps when changing policy.


• Cannot say how long easy policy will remain after negative interest rate policy ends.

ECONOMY

• Japan's economy is to gradually pick up in the coming months.


• Confirms the economy is progressing in line with forecasts.


• Moderate growth in consumption will continue after the Spring due to wage hikes.

MARKETS

• Must carefully watch financial and FX moves alongside the impact on the economy and prices.


• No comment on short-term stock market moves.


• Closely watching stock prices and forex market.

EARTHQUAKE

• Cannot fully understand the economic impact of the Noto Peninsula Earthquake.

Reaction details (06:36)

• 
  06:38GMT: Modest strength in the JPY seen as BoJ Governor Ueda delivers initial remarks, with the pair moving from 147.99 to 147.78 over eight minutes.


• 
  06:44GMT: As Governor Ueda said the BoJ confidence has grown in the achievement in the price target, USD/JPY extended losses to a low of 147.50 around 14 minutes after the presser commenced. (100 DMA at 147.44).


• 
  06:48GMT: USD/JPY fell under its 100 DMA to at 147.34 low.


• 
  06:55GMT: As Governor Ueda said "Will certainly foresee further rate hikes when exiting negative interest rate policy", the pair fell to a 147.11 low.


• 
  06:57GMT: USD/JPY dipped under 147.00 to a 146.98 low before trimming losses to 147.24.


• 
  07:20GMT: USD/JPY is gradually paring some losses, at 147.40 last.


• 
  07:31GMT: The pair continues trimming losses with a brief spike higher to 147.64 despite a lack of headlines at the time - potential profit-taking cannot be ruled out.


• 
  07:37GMT: USD/JPY at 147.58 as Ueda's presser ends.

Analysis details (06:34)

BOJ ANNOUNCEMENT RECAP

• BoJ refrained from any surprises and maintained its policy settings with negative rates at -0.10% and its 10yr JGB yield target at 0% with a 1% reference for purchase operations.


• BoJ also kept its forward guidance unchanged with a pledge to continue with QQE with YCC as long as needed and won't hesitate to take additional easing steps if required.


• Furthermore, it noted that inflation expectations are gradually heightening and that inflation will likely gradually accelerate towards the BoJ target through to the end of the projected period.


• The latest Outlook Report also provided very little to catch markets off guard as although the fiscal 2024 median forecast was cut to 2.4% from 2.8%, this was in line with expectations for a reduction to the mid-2% range, while the fiscal 2025 median forecast was raised to 1.8% from 1.7%.

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23 Jan 2024 - 06:33- Fixed IncomeData- Source: Newswires