Bank of Japan deputy governor Uchida:
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Japan’s economy has recovered moderately, although some weakness has been seen in parts.
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Japan’s economic growth is likely to moderate due to the effects of trade and other policies.
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Uncertainty surrounding trade policies remains extremely high.
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It is important to maintain loose monetary policy to support the economy.
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We expect to raise interest rates in line with economic and price improvements, if our scenario is realised.
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We will judge whether the economy and prices move in line with our forecast without any pre-set idea.
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It is likely that Japan’s economic growth will moderate and underlying inflation will be sluggish temporarily.
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It is hard to say from current data how trade talks will turn out, or which direction domestic and overseas economies and markets will move.
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Overseas and Japanese economies appear to be at a critical point, with very high uncertainty.
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Economic uncertainties are likely to act as downside risks to inflation.
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Cost-push factors are pushing up inflation, mainly for food prices.
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There are high uncertainties over Japan’s economy, and risks are skewed to the downside.
These comments from BoJ Deputy Governor Uchida point to a cautious tone at the Bank, reinforcing expectations that the central bank will maintain its ultra-loose policy for now. While Uchida acknowledged a moderate recovery, he highlighted high uncertainty around trade policies, weakening growth momentum, and sluggish underlying inflation. With risks skewed to the downside and food-driven cost pressures persisting, markets are likely to temper bets on near-term rate hikes. The yen remained under pressure, and Japanese government bonds found support on the dovish read-through.
While the US and Japan have apparently reached a trade deal, Uchida, like us, has no idea what is it in it.
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This article was written by Eamonn Sheridan at investinglive.com.