[RECAP] RECENT JAPANESE HEADLINES AND HIGHLIGHTS AHEAD OF 19TH MARCH BOJ MEETING

BOJ COMMENTARY

[7th March] Governor Ueda:

• Fully possible to seek exit from stimulus while striving to achieve 2% target, and will mull adjusting easing if BoJ can achieve price target and chance of reaching target is gradually rising. Ueda says the extent of rate hikes will be determined by the situation at the time in case negative rates are lifted.


• Will consider rolling back massive stimulus programme once positive cycle of wages and inflation is confirmed.


• “Regardless of whether we abandon YCC or leave it, we will continue to buy JGBs. We will not cause a discontinuation of our monetary policy.”

[7th March] Board Member Nakagawa:

• Japan's economy making steady progress toward achievement of price target, adds given risks and uncertainties, she would like to gather information without any preset idea and make appropriate monetary policy decision. Main scenario is that expectations of rising wages will underpin consumer sentiment, but there is risk that real income will undershoot and weigh on demand, economy and prices.


• Can foresee Japan's economy achieving a positive wage-inflation cycle. If the BoJ judges that sustained achievement of price goal foreseen, BoJ will decide whether or not to tweak YCC, risky asset buying and other policy means.


• Some weak signs seen in consumption data but no big change to trend of moderate increase. prospects of sustainably achieving 2% inflation target is gradually heightening. It will take until autumn and beyond if BoJ was to wait until smaller firms' wage negotiation outcome. Will scrutinise whether and how long BoJ should analyse data in deciding policy shift.


• When debating ending negative rate, BoJ should also debate fate of other unconventional monetary easing tools in place. Developments in consumption would be very important factor in deciding when to end negative rates.


• Don't necessarily need to wait for all of small, mid-sized firms' wage talks outcome in deciding when to end negative rates. It's important to ensure wages keep rising as a trend and sustain inflation around 2%. Have no pre-set idea in mind on whether to end YCC in tandem with an exit from negative rates. Still have 10 days until the policy meeting, during which she will look at various data from hearings they conducted and noted that data is available on a daily basis.

[29th February] Board Member Takata:

• Japan's economy is in inflection point of changing 'norm' that people think wages and prices are not rising, adds achievement of price target is coming into sight. Exit measures would include abandoning yield curve control framework, ending negative rates, overshoot commitment. Achievement of 2% inflation target is becoming in sight despite uncertainty of economy outlook.


• He said he would call for a gear shift in policy and not going backward, says not made up mind yet on monetary policy decision, when asked about whether to end negative interest rates in March or April.


• Not thinking of raising interest rates one after another. Gradual steps will be needed amid mixed circumstances surrounding small firms. Various options remain when we dismantle yield curve control framework. Will not respond automatically to any target when asked about rate hikes after ending negative rates. There is no order of steps in monetary policy exit. We need to keep some easing measures to some extent.

[22nd February] Former policymaker Sakurai

• BoJ could end negative rates in March if this year's pay hikes exceed 4%, although there's an equal chance it may wait until April. BoJ appears to be fully prepared for an exit, it's a question of when Governor Ueda makes a call. (Sakurai rightly predicted the BoJ's tweak to YCC in October 2023).

BOJ SOURCES

[6th March] BoJ is said to have differing views among members the timing of a rate move; officials are said to get more confidence on about stronger wage growth, according to Bloomberg sources. No consensus yet on whether the central bank should move at the end of its policy meeting on March 19th or wait until April. BoJ sees pay increases outpacing last year’s gains, sources said. BoJ is likely to mull tweaking its assessment of consumer spending and production to reflect some weakness; seen keeping its overall view for a gradual economic recovery unchanged, sources added. Wording could be added to reflect fragility in the economy. BoJ will reportedly will reach its policy decision after economic data and financial markets "until the last minute". – Via Bloomberg.

[6th March] At the March BoJ policy meeting some attendees are reportedly likely to say that lifting negative interest rates is reasonable, via JiJi. At least one of the nine members of the BoJ committee argues that lifting negative rates is appropriate, in reference to the March meeting. If no majority (5 or more), then "the policy change will not be made until April or later." – Via Jiji.

[6th March] BoJ is likely to maintain its forecast that the economy will continue to recover and is expected to revise down assessment on consumption and output at the March meeting, according to sources cited by Reuters. – Via Reuters

GOVERNMENT

[7th March] Some Japanese government officials are said to support a near-term BoJ lift-off, according to Bloomberg. 

[5th March] Japan's Top Currency Diplomat Kanda must brace for higher interest rates environment given assumed interest rates raised to 1.9% from 1.1%; must strive for responsible fiscal management by achieving primary budget balancing in FY25/26.

[5th March] Japan's Deputy Chief Cabinet Secretary says it is important to embed new business practices within Japan, so costs are appropriately passed on. Hopes BoJ continues to work closely with the gov't. Gradually seeing a positive cycle of rising growth/wages.

[4th March] Japanese Finance Minister Suzuki says no truth to media report that govt considering announcing end of deflation. No truth to market views that govt may be considering announcing exit from deflation in sync with BoJ's decision on negative rates policy.

[4th March] Japanese Chief Cabinet Secretary says the economy is not yet at a stage where the government can call an end to deflation.

[4th March] Japan Minister of State for Economic and Fiscal Policy Shindo says not thinking now of declaring anything, when asked whether govt could call an end to deflation.

WAGES

[7th March] Japan's Rengo wage demand this year reportedly at 5.85% (4.49% in 2023), via Bloomberg; Reuters adds that the 5.85% figure exceeds 5.0% for the first occasion in 30-years.

[6th March] Japanese Labour Cash Earnings YY (Jan) 2.0% vs Exp. 1.3% (Prev. 1.0%, Rev. 0.8%)

[6th March] Japanese Real Cash Earnings YY (Jan) -0.6% vs Exp. -1.5% (Prev. -1.9%, Rev. -2.0%)

INFLATION

[4th March] Japanese CPI, Overall Tokyo (Feb) 2.6% (Prev. 1.6%, Rev. 1.8%)

[4th March] Japanese CPI Tokyo Ex fresh food YY (Feb) 2.5% vs. Exp. 2.5% (Prev. 1.6%, Rev. 1.8%)

[26th February] Japanese National CPI YY (Jan) 2.2% vs. Exp. 1.9% (Prev. 2.6%)

[26th February] Japanese CPI Index Ex Fresh Food (Jan) 106.4 (Prev. 106.4)

[26th February] Japanese National CPI Ex. Fresh Food & Energy YY (Jan) 3.5% vs. Exp. 3.3% (Prev. 3.7%)

[26th February] Japanese National CPI Ex. Fresh Food YY (Jan) 2.0% vs. Exp. 1.8% (Prev. 2.3%)

LOOKING AHEAD

[15th March] The first pay tally from the Rengo union is due on March 15th; earlier in the year, Rengo said it aims to attain a wage increase higher than 2023 by demanding an increase of more than 5%.

[19th March] BoJ next meets on March 19th; markets have around a 45% chance of a hike at that gathering.

07 Mar 2024 - 08:04- Fixed IncomeData- Source: Newsquawk