BoJ Summary of Opinions from January meeting states that consumer inflation is likely to gradually accelerate as more firms pass on costs to households and output gap improves

Says:

• Hard to achieve BoJ's price target by end of fiscal 2023.


• Risks to price outlook are roughly balanced with chance of upside risk if consumption remains solid despite price increases.


• Consumer inflation may temporarily approach 2% from April onwards although key is whether economy has momentum for such a move to be sustainable.


• A pick-up in Japan's economy has become evident and the economy is likely to recover as downward pressure stemming from COVID-19 on services consumption and the effects of supply-side constraints wane.


• Along with the spread of the Omicron variant, there have been heightening uncertainties regarding the outlook for Japan's economy.


• Bank should continue to do its utmost to support financing, mainly of firms, and maintain stability in financial markets for the time being. Therefore, it is appropriate for the Bank to maintain the current monetary easing.


• BoJ must take additional easing steps as needed and it is appropriate to maintain current forward guidance on interest rates and monetary base commitment.

Via BoJ

Analysis details (00:06)

• As a reminder, the BoJ kept monetary policy settings unchanged at that meeting as expected in which it held rates at -0.10% and the 10yr JGB yield target at 0%, while it stated that it expects rates to remain at current or lower levels and that it will take more action without hesitation if needed which was in contrast to recent source reports that suggested debate among policymakers on how soon a rate increase can be signalled. BoJ Governor Kuroda also made it explicitly clear in the post-meeting press conference that they were not at all considering rate hikes or tweaks to the current policy easing and reiterated that there is no need to adjust monetary easing with the current price outlook. Furthermore, the central bank announced at the meeting to extend loan disbursements under its fund-provision scheme by one year to stimulate bank lending, while it lowered its FY21 Real GDP forecast to 2.8% from 3.4% but raised FY22 estimates for Real GDP to 3.8% from 2.9% and for Core CPI to 1.1% from 0.9%. 

25 Jan 2022 - 23:50- Fixed IncomeData- Source: Newswires/BoJ