Bank of Japan Uchida says does not expect very easy policy to change in a big way

Speech by Deputy Governor UChida in Nara (Japan’s Economy and Monetary Policy)

Headlines via Reuters:

  • BOJ won’t aggressively hike rates even after ending negative rate
  • Japan’s real
    interest rate is in deep negative territory, monetary conditions are
    very accommodative
  • We don’t expect this
    to change in a big way
  • Uncertainty over
    outlook remain high, but likelihood of sustainably achieving our
    price target gradually heightening
  • We expect Japan’s
    economic recovery to continue, positive wage-inflation cycle to
  • Consumer inflation
    has exceeded 2% but this is mainly due to cost-push factors
  • If sustained,
    sustainable achievement of price target comes into sight, role of
    massive stimulus will have been met and we will consider reviewing it
  • Regardless of when
    we tweak policy, we see need to take steps in communication, market
    operations to ensure there is no disruptive moves in financial
  • Before we introduced
    negative rates, BOJ applied a 0.1% interest on excess reserves,
    overnight call rate moved in a range of 0-0.1%
  • If we were to move
    back to that situation, it would be equivalent to a 0.1% interest
    rate hike
  • What is more important is the future short-term rate path, which
    will be set at appropriate level so consumer inflation moves around
    BOJ’s 2% target
  • YCC and BOJ’s bond
    buying management are intertwined
  • When we end or tweak
    YCC, we will think about how we would communicate our bond buying
  • Tweak to YCC would mean allowing yields to move more freely but we
    will ensure this does not lead to big change in our bond buying
    amount, sharp rise in yields
  • It would be natural
    to end ETF, J-REIT buying if achievement of 2% inflation can be
  • Even if we were to
    end ETF, J-REIT buying, impact on markets won’t be big
  • What to do with our
    very huge ETF, J-REIT holding is a different problem, this is
    something we need to consider taking time
  • We will like to maintain stable, accommodative monetary environment
  • Expects service
    prices to rise alongside wage increases

USD/JPY has popped to new session high above 148.25 on Uchida’s remarks

This article was written by Eamonn Sheridan at Source