[PRESS CONFERENCE] BoJ Governor Ueda says easy financial conditions will be maintained for the time being; Weak JPY so far is not having a big impact on trend inflation

MONETARY POLICY

• Easy financial conditions will be maintained for the time being


• Will adjust degree of easing if underlying inflation rates rise.


• Conduct on policy from now on will depend on state of economy and prices at the time.


• Monetary policy conduct depends on future economic, price, and financial conditions.


• Will not evaluate or judge policy based on one single indicator.


• Economic outlook, risks overshoot may also be a reason for policy change.


• Will raise rates if trend inflation heads towards 2%.


• Will evaluate future underlying inflation based on services prices, weak JPY-induced import price hikes, corporate wages and price-setting behaviour.


• Difficult to gauge timing of future rate hikes. 


• Realisation of outlook itself could be a reason for rate change.


• Will continue to narrow down neutral rate of interest as soon as possible.


• If prices are moving are moving in line with forecasts, that would be a reason for adjusting the degree of monetary accommodation and additional rate hikes.


• The concept of "threshold" on likelihood of inflation target achievement is "obsolete" after the March policy move.


• Does not have a specific idea in mine when it comes to raising rates next.


• Must scrutinize the impact on borrowers, consumption and financial institutions when it decides to hike rates next.

FX 

• Monetary policy is not aimed to control FX rates directly.


• Will continue to watch the impact of FX on economy and prices.


• If FX fluctuations affects underlying inflation, that could be a consideration for monetary policy.


• Weak JPY so far is not having a big impact on trend inflation


• FX impact on inflation is usually tentative.


• Chance of prolonged weak JPY is not zero.


• Can pre-emptively judge if weak JPY affects underlying inflation and spring wage talks next year.


• FX impact on economy include positive ones.


• JPY is somewhat weaker than expected in March.


• Will not comment on whether dealing with weak JPY should be left to the Finance Ministry.

JGB

• Reduction in JGB buying in the future is in sight.


• Does not want to use reduction of JGB purchases as a proactive policy tool.


• Will carry out appropriate short-term rate adjustments, taking effect of BoJ's JGB holding on long-term yield into consideration.


• No change to JGB buying amount from March.


• Future direction of JGB buying will be decided at policy board.


• No objection at today's meeting to the stance on buying around JPY 6tln JGBs.


• 
  Will not comment on FX moves.


• Chance of negative impact on consumption is not zero if weak Yen prolongs.

INFLATION

• Likelihood of achieving 2% inflation target is gradually rising


• Main reason for FY24 inflation outlook upgrade is higher crude price, whilst weak JPY had an impact to some extent.


• Still examining how March decision is being digested by markets.


• Achievement of 2% inflation target is "extremely close" if FY25/26 forecasts materialise.


• When inflation outlook materialises, that's almost in the state of neutral rate of interest.


• Impact of Tokyo's free high school tuition will have a small impact on nationwide CPI.


• Inflation is not necessarily entirely weak if you look at other service prices.


• Japan has no experience of sustained inflation for the past 20-30 years.


• Mid-to-long-term underlying inflation rate is in mid-1% in weighted average indicator.


• Appropriate for short-term rates to remain in 0-0.1% with underlying inflation rate still under 2%.


• Cannot identify when underlying inflation rate touches 2% in a satisfactory way.


• What is transitory in in inflation is measuring what varies from time to time.


• Import inflation is not as rapid as that seen in 2021-2022. 


• Not necessarily thinking underlying inflation evidently rose between March and April. 

WAGES

• Positive stance by firms on wages and price-setting mechanism is continuing.

ECONOMY

• The economy has recovered moderately, although some weakness has been seen.


• Must pay die attentional to financial and FX market moves and its impact on Japan's economy and prices.


• Expecting consumption will be stronger with improved real income, which will be a crucial checkpoint for policy conducts.

DATA

• Various data that have come out since March have panned out as expected.

Analysis details (07:32)

BOJ DECISION

• 
  BoJ kept its policy settings unchanged with the short-term interest rate target at 0.0%-0.1%, as expected, with the decision made unanimously, while it dropped the reference from the statement that it currently buys about JPY 6tln worth of JGBs per month but stated that it will conduct JGB, commercial paper and corporate bond buying in line with the decision in March.
  


• BoJ said it must be vigilant to FX and market moves and their impact on the economy and prices but noted no excessive behaviour is seen in Japan's asset market and financial institutions' practices.
  


• Furthermore, it stated that if trend inflation rises, the BoJ will likely adjust the degree of monetary easing but also added to expect accommodative monetary conditions to continue for the time being. In terms of the latest Outlook Report, Board Members' Real GDP median forecast for Fiscal 2024 was cut to 0.8% from 1.2% but the Fiscal 2025 median forecast was maintained at 1.0%, while the Core CPI Fiscal 2024 median forecast was raised to 2.8% from 2.4% and Fiscal 2025 median forecast was raised to 1.9% from 1.8%.
  

26 Apr 2024 - 07:30- Fixed IncomeData- Source: Newswires