Bank of Japan Board Member, Tamura Naoki at a meeting with local leaders in Nagano
- Worried that sharp rises in rice prices, coupled with inflation exceeding 2% lasting for nearly three years, could hurt consumption.
- Output gap may already effectively be in positive territory as supply constraints put upward pressure on prices.
- Corporate and household inflation expectations are heightening, having roughly reached levels around 2%.
- Upward price risks are building up.
- The BOJ must raise rates to levels deemed neutral on a nominal basis, which is at least around 1%.
- The BOJ must raise rates at least to around 1% in the latter half of fiscal 2025.
- The BOJ must raise rates in several stages in a timely fashion while scrutinising what the appropriate short-term rate level could be for the economy.
- Even if BOJ hikes rates to 0.75%, real interest rates will remain deeply negative.
- Personally don’t think we can say BOJ’s past massive monetary easing had a positive effect as a whole given strong side-effects.
- Must scrutinise whether prolonged monetary easing could cause problems such as excessive yen falls and housing price spikes.
- Bank of Japan shouldn’t persist in achieving 2.0% inflation per se, as long as Japan is experiencing moderate price rises
- Can expect this year’s Spring wage talks to result in wage increases consistent with our 2% inflation target
The yen is gaining ground on all this.
This article was written by Eamonn Sheridan at www.forexlive.com. Source