Ueda is speaking in Osaka. Headlines via Reuters:
- Japan’s economy recovering moderately
- Our basic stance is
that we must patiently maintain monetary easing - Current policy
framework has big stimulative effect on economy, but at times could
cause big side-effects - BOJ’s July move
helped heighten sustainability of our monetary easing framework - Our baseline
scenario is for key driver of inflation to gradually switch,
strengthen virtuous wage-inflation cycle - Effect of rising
import prices likely to gradually dissipate - Uncertainty
surrounding our baseline scenario is very high, not sure at this
stage whether this will materialize - There is good chance
wage growth will accelerate as competition for talent intensify - Changes in corporate
behaviour could speed up more than expected
-
On the other hand, wages, prices may struggle to rise if Japan’s
economy is hit by negative external or internal shocks - Many
firms still have not decided whether to hike wages significantly, so
we must scrutinise whether changes in corporate wage-setting
behaviour could be sustained
- Stable, sustainable achievement of 2% inflation not yet in sight
- Japan’s economy is
at critical stage on whether it can achieve a positive wage-inflation
cycle
-
Must continue to be vigilant to chance past sharp US rate hikes could
affect economy, financial system with a lag - Chinese economy’s
slow pace of pick-up is also worrying
-
It is true inflation is exceeding 2% for prolonged period, but that
alone cannot lead us to conclude that Japan is close to stably,
sustainably achieving our target -
Key to whether Japan is close
to achieving our target is whether wage growth leads to moderate rise
in inflation -
Japan firms are changing prices more frequently than in past, which
is important sign suggesting wages and inflation could move in tandem
There is plenty of nuance in Ueda’s remarks. The summary is that bolded comment though. Without stable and sustainable 2% inflation there is little urgency for the Bank of Japan to tighten monetary policy.
Full text:
Japan’s Economy and Monetary Policy (PDF)
This article was written by Eamonn Sheridan at www.forexlive.com. Source