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▼ BOJ To Cut Monetary Stimulus If Inflation Trend Nears 2%: Ueda
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Bank of Japan chief Kazuo Ueda said Tuesday the central bank will further reduce monetary stimulus if the country's basic inflation rate nears 2 percent as expected.
Ueda told a parliamentary session that the BOJ will examine upcoming data to confirm the strength of wage growth in line with the outcomes of labor-management negotiations this spring, and whether services prices will rise to achieve stable inflation.
He also said the BOJ's monetary policy is not designed to "control" foreign exchange rates, yet cautioned that a policy response would not be ruled out if the impact of currency moves on the economy cannot be ignored.
The BOJ's shift away from years of unorthodox monetary easing steps has so far failed to reverse the yen's weakness against the U.S. dollar, prompting a series of verbal warnings by Japanese monetary authorities of possible currency market intervention.
"If basic inflation gradually moves toward 2 percent as we expect, it will become possible to reduce the degree of monetary easing a little bit more," Ueda said during the upper house session.
The Japanese central bank ended its negative rate policy and yield cap program at its policy meeting in March, heartened by strong wage hikes that boosted the chances of its 2 percent inflation target being finally achieved in a "stable and sustainable manner."
The basic inflation rate, which strips away transitory factors, is currently "slightly below" 2 percent, making it necessary for financial conditions to remain "accommodative for the time being," Ueda said.
But the governor noted that the likelihood of reaching that target has increased greatly. "If the positive cycle (of pay and price hikes) strengthens more than we have seen, then it will be possible to reduce the degree of monetary easing at a faster pace," he added.
The BOJ currently expects core consumer prices, excluding volatile fresh food items, to rise 2.4 percent in fiscal 2024 through next March and then 1.8 percent in fiscal 2025. A fresh economic and price outlook report is scheduled for release at the end of a policy meeting later this month.
After going ahead with its first interest rate hike in 17 years, financial markets are looking for clues as to how far and fast the dovish central bank will raise rates.
© KYODO
Ueda told a parliamentary session that the BOJ will examine upcoming data to confirm the strength of wage growth in line with the outcomes of labor-management negotiations this spring, and whether services prices will rise to achieve stable inflation.
He also said the BOJ's monetary policy is not designed to "control" foreign exchange rates, yet cautioned that a policy response would not be ruled out if the impact of currency moves on the economy cannot be ignored.
The BOJ's shift away from years of unorthodox monetary easing steps has so far failed to reverse the yen's weakness against the U.S. dollar, prompting a series of verbal warnings by Japanese monetary authorities of possible currency market intervention.
"If basic inflation gradually moves toward 2 percent as we expect, it will become possible to reduce the degree of monetary easing a little bit more," Ueda said during the upper house session.
The Japanese central bank ended its negative rate policy and yield cap program at its policy meeting in March, heartened by strong wage hikes that boosted the chances of its 2 percent inflation target being finally achieved in a "stable and sustainable manner."
The basic inflation rate, which strips away transitory factors, is currently "slightly below" 2 percent, making it necessary for financial conditions to remain "accommodative for the time being," Ueda said.
But the governor noted that the likelihood of reaching that target has increased greatly. "If the positive cycle (of pay and price hikes) strengthens more than we have seen, then it will be possible to reduce the degree of monetary easing at a faster pace," he added.
The BOJ currently expects core consumer prices, excluding volatile fresh food items, to rise 2.4 percent in fiscal 2024 through next March and then 1.8 percent in fiscal 2025. A fresh economic and price outlook report is scheduled for release at the end of a policy meeting later this month.
After going ahead with its first interest rate hike in 17 years, financial markets are looking for clues as to how far and fast the dovish central bank will raise rates.
© KYODO
- 9/4 20:31
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