Bank of Japan Governor Ueda speech in Nagoya titled:
- Japan’s Economy and Monetary Policy (full text)
Headlines via Reuters:
- Japan’s economy recovering moderately
- Japan’s economy
likely to continue recovering - Long-term rates may
rise somewhat but what’s important is to look at real interest rate
that takes into account inflation expectations -
Even if long-term rates rise, real interest rate will move in
negative territory so monetary conditions will be sufficiently
accommodative - There is uncertainty
on whether Japan will see positive cycle of wage and inflation, as we
predict - We will patiently
maintain monetary easing to support economic activity -
We will continue massive bond buying even under new operation we
decided last week - We will conduct
nimble market operations when interest rate rise, depending on level
and speed of moves of long-term rates - Even if long-term
rates come under upward pressure, don’t expect 10-year JGB yield to
sharply exceed 1% - Under YCC, we need
to carefully weigh the effect of the policy in stimulating economy,
and the side-effects
-
Uncertainty surrounding our baseline scenario on economy is extremely
high, one of which is overseas economic outlook
- Must keep close eye on impact of rapid fed rate hike on markets, fx
moves - Need to be vigilant
to whether China’s recovery momentum could be hampered by property
market adjustment -
Cost-push pressure on inflation likely to gradually dissipate,
although it may take more time given recent rises in oil prices - Don’t expect
inflation to move back to around zero like during pre-Covid periods - Medium-, long-term
inflation expectations heightening moderately, likely affecting
firms’ corporate wage-, price-setting behaviour - Likelihood of Japan
achieving 2% inflation target gradually increasing but not in a stage
where we can say so with enough certainty - Key is whether wages
will keep rising and such practice become embedded in society - Next year’s spring
wage negotiation is particularly important, watching development
carefully
- There is uncertainty on whether wage hikes will continue next year
- Another key factor
is whether firms will set prices based on assumption wages will
rising
more to come
This article was written by Eamonn Sheridan at www.forexlive.com. Source