BoJ’s Adachi: Central bank must maintain accommodative financial conditions until price goal achieved
|Bank of Japan (BoJ) board member Seiji Adachi stuck to his dovish rhetoric during his speech on Wednesday.
Key quotes
Changing monetary policy frequently to stablise FX moves would lead to big changes in rate moves
If interest rate moves are too big, that would cause disruptions in household and corporate investment
Responding to short-term FX moves with monetary policy would affect price stability
If excessive yen falls are prolonged and expected to affect achievement of our price target, responding with monetary policy becomes an option.
It is possible to consider responding with monetary policy if FX moves cause big changes in inflation expectations.
Japan's economy is recovering moderately, although there are some weak signs.
Consumption holding steady as a whole mainly for service spending.
Japan's economy not slumping but not in strong shape either with various uncertainties remaining.
BoJ must maintain accommodative financial conditions until price goal achieved.
We are not yet at stage where we are convinced that there is the sustained achievement of price target, so must maintain accommodative conditions.
We must absolutely avoid raising interest rates prematurely.
If we focus too much on downside risks, inflation may accelerate and might force us to tighten monetary rapidly as a result.
By fixing interest rates at current zero levels until inflation is durably at our price target, we might be forced to hike rates rapidly later and therefore risk hurting economy.
We must look not just at downside but upside risks in guiding monetary policy.
Important to adjust degree of monetary support in several stages, as long as underlying inflation continues to head toward 2%.
At some stage in the future, we will likely reduce our JGB purchases.
Market reaction
USD/JPY defends gains above 157.00 following these dovish comments. The risk-off mood is dragging the pair lower.
Information on these pages contains forward-looking statements that involve risks and uncertainties. Markets and instruments profiled on this page are for informational purposes only and should not in any way come across as a recommendation to buy or sell in these assets. You should do your own thorough research before making any investment decisions. FXStreet does not in any way guarantee that this information is free from mistakes, errors, or material misstatements. It also does not guarantee that this information is of a timely nature. Investing in Open Markets involves a great deal of risk, including the loss of all or a portion of your investment, as well as emotional distress. All risks, losses and costs associated with investing, including total loss of principal, are your responsibility. The views and opinions expressed in this article are those of the authors and do not necessarily reflect the official policy or position of FXStreet nor its advertisers.