Incoming BoJ Gov Ueda: Possible to push up prices, wages with monetary easing

Dhwani Mehta FXStreet

Bank of Japan (BoJ) Governor designate Kazuo Ueda is shedding more light on the monetary policy during his appearance on Monday.

Key quotes

Possible to push up prices, wages with monetary easing.

Trend inflation must heighten sharply for boj to shift to monetary tightening.

It's not as if I have no ideas on how to tweak policy in future, but what exactly the BoJ will do will change depending on future economic developments.

Interest rates remain low under current monetary easing, helping corporate investment.

Monetary policy alone cannot raise prices immediately .

Inflation is not determined by monetary policy alone.

If external shock is big and prolonged, big monetary easing may not necessarily lead to price rises.

BoJ-govt joint statement's mention of need for govt to sustain market trust in long-term finances is important.

BoJ has purchased JGBs as part of efforts to achieve 2% inflation target.

Japan's trend inflation, which BoJ bases monetary policy on, is positive but below 2%.

Weak Yen boosts global firms' profits, but hurts firms reliant on imports and households.

It's true lowering interest rates on savings hurts consumers while bringing down mortgage loans supporting households.

If maintaining current policy does not push up trend inflation, we need to come up with more sustainable monetary policy, or monetary easing framework.

Current easing is aimed at meeting 2% inflation target so this doesn't mean to pursue monetary easing to give rise to vicious inflation.

Fact that BoJ’s bond buying is increasing recently is due partly to fact that inflation expectations are heightening.

If achievement of BoJ’s price target comes into sight, boj will gradually reduce bond buying.

If current easing doesn't cause trend inflation to rise, may need to consider more sustainable monetary easing steps.

Many other countries adopt 2% inflation target.

Changing 2% inflation target into 1% target would strengthen Yen short-term, weaken the currency long-term.

Market reaction

The USD/JPY pair was last seen trading at 136.31, down 0.11% on the day.

Author

Dhwani Mehta

FXStreet

Residing in Mumbai (India), Dhwani is a Senior Analyst and Manager of the Asian session at FXStreet. She has over 10 years of experience in analyzing and covering the global financial markets, with specialization in Forex and commodities markets.

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