[PRESS CONFERENCE] BoJ Governor Ueda says Japan's economy is recovering moderately although some weak moves are seen

Policy

• Will continue to adjust the degree of easing of the economic/price outlook is to be realised.


• Will guide policy from the standpoint of sustainably and stably attaining the price target.


• Timing and scope of raising rates further is dependent on the economy, financial and price conditions.


• No preset idea on future adjustments. 


• Will carefully monitor the market impact from the rate hike. Need to think about its impact in the context of rising inflation and wages.


• No preconceived ideas around the scope/timing of the next rate rise.


• No new information on where the neutral rate should be.


• Have come closer to the neutral rate with today's decision. However, still a long way to go.


• Gradually guiding policy out of ultra-loose conditions, without high inflation, is deal.


• 
  Next rate hike will depend less on economic growth but more on price moves. Would rather proceed with caution, do not want to wait until a very large negative impact emerges from tightening.

Prices/Wages

• Board has judged that spring wage talks will result in strong hikes again this year. Growing number of firms expressed intentions to continue increasing wages steadily.


• Import prices have been on an upward trend vs the prior outlook in October, amid weaker JPY.


• Expect CPI to settle after mid-2025.


• If the wage setting norm continues to change, the likelihood of achieving the (inflation) target rises significantly.


• 
  Growing number of firms factoring in plans to raise wages, in view of the medium-term projection.


• View prices as being "on track" with forecasts, as higher wages are reflected on prices.


• Possible the spring wage talks in FY26 will see upward pressure, if inflation expectations rise in FY25.


• Always mindful of real wages falling and consumption languishing.


• Real wages to go positive, if certain wage growth continues.


• Wage growth and inflation expectations are among the relatively tangible indicators of underlying inflation.

Inflation

• Price trend is increasing towards the 2% inflation target.


• Likelihood for realising the outlook is increasing. The virtuous cycle will strengthen gradually.


• On 2025 forecasts, upward revisions primarily at the middle of the calendar year.


• Appropriate response will be to gradually ascertain how underlying inflation rises in the future.


• Upward revisions to FY24 & FY25 core CPI forecasts are primarily due to cost-push factors.

FX

• FX impact on prices has become larger than previously, as firms are more eager to give wage and price hikes.

Global Markets

• Financial markets have been stable as a whole.


• Markets have been calm post-Trump


• Must be attentive to markets and impact on the economy/prices.

Growth

• Labour shortage resulted in downgrades to the potential growth rate. This may impact the neutral rate, though likely very small.

Tariffs/Trump

• At this point, US tariff policies are uncertain. Cannot comment on the impact.


• Will provide a view once the details become clear.


• Will watch for the impact on the global economy.


• Thus far, Trump's moves are within expectations - no big market rout seen.

ETFs

• Still need time to consider what to do with the BoJ's ETF holdings.

Reaction details (06:40)

USD/JPY

• The comments from Ueda around spring wage talks weighed on USD/JPY, which slipped below 155.00 to a 154.91 low [06:40GMT]
  


• The remark that they have no preset idea on future adjustments lifted USD/JPY off the 154.86 session low and back above the 155.00 handle [06:43GMT]
  


• Specifically, USD/JPY printed a 155.74 session high [06:44GMT] before pulling back to hold around the 155.40 mark [06:46GMT]
  

JGBs

• Ueda's initial remarks, particularly around the spring wage talks, weighed on JGBs which slipped from 140.72 [06:33GMT] to 140.61 [06:39GMT]
  


• Thereafter, JGBs lifted from 140.62 [06:40GMT] to 140.78 [06:46GMT], echoing the upward move in USD/JPY as Ueda said they have no preset idea on future adjustments.

Analysis details (07:35)

• In brief, Ueda began with a hawkish tilt given his comments around spring wage talks (Board has judged that spring wage talks will result in strong hikes again this year. Growing number of firms expressed intentions to continue increasing wages steadily) and his judgement that markets have been stable post-Trump.


• However, this was superseded by comments on the policy path (no preset idea on future adjustments & no preconceived ideas around the scope/timing of the next rate rise), a remark which sparked a dovish move. Potentially as participants were looking for an explicit nod to March, or another meeting, given the hawkish elements of his initial commentary and upward revisions to the CPI forecasts.


• Overall, the hawkish remarks from Ueda around the spring negotiations and the view that the upward revisions to the inflation forecasts are primarily centred around the middle of the year sets a roadmap for another 2025 hike. However, Ueda's comment that they have no preset idea on the timing of future moves stems the hawkishness of this somewhat; as such, we now look to the May meeting where more information will be available on the spring wage talks, though of course a March move cannot be ruled out.

24 Jan 2025 - 06:33- ForexData- Source: Newswires