BoJ Summary of Opinions from the June meeting stated it is appropriate to maintain current monetary easing

Says:

• Wage growth is needed, not just cost-push inflation to sustainably and stably hit the price target.


• Premature to shift policy as smaller firms become keen to hike wages and invest more.


• BoJ must maintain easy policy with an eye on side-effects, as long-term risks to prices are skewed to the downside.


• Must keep easy policy but must be mindful of chance it is under-estimating sustainability of Japan's price rises.


• No need to make operational tweaks to YCC as distortion in shape of yield curve has been resolved.


• BoJ must consider reviewing YCC at an early stage, even as it maintains easy monetary policy.


• There is uncertainty on whether inflation, after slowing toward the middle of the current fiscal year, will bounce back.


• Inflationary pressure is likely to remain strong for the time being.


• There is a chance consumer inflation will overshoot initial expectations.


• There is a strong chance that consumer inflation may moderate, but won't slow back below 2% towards middle of current fiscal year.

Via BoJ

Analysis details (01:21)

As a reminder, the BoJ maintained its ultra-easy policy settings at the june 15th-16th meeting, as widely expected, with the Bank rate kept at -0.10% and QQE with YCC left unchanged at the current parameters to target 10yr JGB yields at around 0% within a +/-50bps band. The BoJ’s statement from the meeting provided very little in the way of fresh insight as it maintained the view that core consumer inflation is likely to slow the pace of increase towards the middle of the current fiscal year and noted that inflation expectations are moving sideways after heightening. Furthermore, its language on the economy was mixed in which it noted that Japan's economy is picking up and is likely to continue recovering moderately, but also stated that uncertainty is very high, which is supportive of the view that the Bank will continue to take a cautious and patient approach. The commentary from BoJ Governor Ueda at the post-meeting press conference also pointed to a lack of urgency to tweak policy as he stated that more time is needed to meet the 2% inflation target and warned that responding to an inflation undershoot after a premature rate hike is more difficult than responding to an overshoot, but also noted they are weighing the benefits and side-effects of YCC and will update regarding the progress of the review of past policies on the BoJ website starting from July.

26 Jun 2023 - 00:50- Fixed IncomeData- Source: Newswires/BoJ