Bank of Japan Governor Ueda says its important to look at real rates

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
  • There is uncertainty
    on whether Japan will see positive cycle of wage and inflation, as we
  • 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
  • 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
  • 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

more to come

This article was written by Eamonn Sheridan at Source