BoJ Minutes: Members want more time to assess Middle East impact on Japan’s economy, prices
The Bank of Japan (BoJ) board members shared their views on the monetary policy outlook on Thursday, per the BoJ Minutes of the April meeting.
Key quotes
Many members want more time to assess Middle East impact on Japan’s economy, prices.
Several members noted low probability of baseline forecasts materialising, difficult to weigh downside risks to growth against upside inflation risks.One member says situation not urgent enough to justify hastening rate increases.
Members agree it is fitting to keep raising rates amid economic, price, financial shifts.
Few members say BoJ may discuss pros and cons of rate increase if inflation risks outweigh growth downside risks.
Some members say central bank could discuss rate hike if inflation risks greatly outweigh growth downside risks.
Members shared view timing, pace of future rate increases to depend on likelihood of baseline forecasts materializing.
Members agree timing, pace of future rate hikes depend on chances of baseline forecasts materialising and risks to growth, inflation.
Multiple members said central bank could modify monetary easing intensity at suitable pace if chances of baseline forecasts rising.
Member said rate increase at next meeting and beyond possible depending on economic and price risks.
Some members say faster rate hikes needed if Middle East conflict drags on to prevent inflation overshoot.
Board member says central bank shouldn't hesitate to speed up rate hikes, possibly every few months.
One member urges easy monetary policy, cautions against rate hikes amid severe supply chain disruptions in Japan.
One member said Bank of Japan does not target currency rates in monetary policy, exchange rates should be market-determined.
Cabinet office official says BOJ must steer suitable monetary policy to secure Japan’s robust economic expansion, stable prices.
Cabinet office rep hopes BOJ steers policy according to joint statement with government.
Board members Nakagawa, Takata, Tamura jointly suggested lifting overnight policy target to 1.0% from 0.75%, rejected by board.
Market reaction to the BoJ Minutes
At the time of writing, USD/JPY is up 0.41% on the day at 161.31.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
Author
Lallalit Srijandorn
FXStreet
Lallalit Srijandorn is a Parisian at heart. She has lived in France since 2019 and now becomes a digital entrepreneur based in Paris and Bangkok.
