[BOJ PRESS CONFERENCE] BoJ Governor Ueda says will patiently continue monetary easing with decided new measures; Will not hesitate to take additional easing measures if necessary; Getting gradually closer to achieving price target

POLICY

• Will not hesitate to take additional easing measures if necessary.


• BoJ decided to add flexibility to YCC.


• Today's steps came partly as a result of rising US long-term rates.


• Today's decision was aimed at making YCC operation more flexible amid extreme high uncertainties around the economy and financial markets.


• Wanted to tweak YCC before side effects increased, considered FC as part of potential side effects.


• Possibility remains low for monetary policy to fall behind the curve.


• Today's decision was partly aimed at preventing financials market volatility, including FX volatility.


• Don't have preconceived notion of order of exit from YCC or NIRP.


• Will continue both YCC and NIRP until we can foresee the achievement of inflation target.


• Long-term neutral rate is an interest theme, and BoJ has made various analyses, but will not elaborate this time.

BONDS

• Does not see yields rising significantly beyond 1% (Bloomberg)/ Does not think long-term rates will come under pressure to exceed 1%. (Reuters)


• Possible to conduct additional emergency bond-buying at 10yr yield levels under 1%.


• One side-effect of fixed-rate purchase operations was volatility in financial markets.


• Can contain speculative moves in market with flexible market operations.


• Will allow more flexibility when it comes to non-speculative market moves based on fundamentals.


• Says practically speaking, it would be difficult for BoJ staff to ascertain whether day-to-day rise in long-term yields in speculative.

FX

• Important for currencies to move stably reflective fundamentals.


• Closely working with government and monitoring the situation on FX. 


• FX could affect policy if it impacts price outlook.


• Overseas interest rate trends have been dominant factor in recent FX moves.

INFLATION

• Expects inflation to slow in FY25.


• Main reason for inflation outlook overshoot vs July are longer-than-expected effects price pass-through and rising crude prices.


• Not in a situation to foresee sustainable and stable price increases.


• Will closely scrutinise the economy and price situation by examining wages and prices.


• Will carefully monitor if wage-price spiral takes hold.


• Strength of inflation and wages still not sufficient.


• It's true that the likelihood of inflation outlook's realisation is slightly higher but not in a situation that we can foresee it with full confidence.


• Getting gradually closer to achieving price target. (Reuters)/Certainty of achieving price target rising a little. (Bloomberg)


• Will scrutinise effects of government policy on inflation outlook once it is announced.


• Can anticipate a certain level of wage hikes next year.


• Next spring's wage talks will be an important factor. 


• Says there are budding signs that the "norm" of wage price rigidity is changing but still distant from levels considered with 2% inflation.

BROADER ECONOMY

• Japan's economy is recovering moderately.

Analysis details (06:32)

As a reminder:

• BoJ maintained NIRP at -0.10% and the 10yr JGB yield target at 0% but widened the reference range to 100bps up or down from the target from 50bps and made YCC more flexible with the decision on YCC made by 8-1 vote in which board member Nakamura dissented.


• BoJ said it will regard the upper bound of 1% for the 10yr JGB yield as a reference in market operations and will guide market operations nimbly, while it will flexibly increase JGB buying, fixed-rate operations and collateral fund-supplying operations.


• Furthermore, it will determine the offer rate for fixed-rate JGB buying operations each time by taking into account market rates and other factors.

31 Oct 2023 - 06:31- Fixed IncomeData- Source: Newswires