BOJ sees risk of acceleration in price rise but not enough for any policy shift – MNI

“The Bank of Japan (BOJ) expects prices to rise more quickly than officials had anticipated at their July meeting,” MNI reports, citing people familiar with the central bank's thinking.

But the sources added that the jump in inflation to 3% or higher later this year, however, will not be enough to prompt any shift in its easy policy stance unless it feeds into an acceleration of wages next spring.

Key quotes

“Higher food prices, supply side constraints and the failure of government subsidies to curb an increase in petrol prices are set to push inflation well above the BOJ's 2% price stability target.”

“But without significant wage hikes, BOJ officials will maintain the view that annual CPI increases are likely to slow or decline in fiscal 2023.”

“Retailers are becoming more willing to raise prices as leading brands lead the way. Retail prices, particularly in services, tend to be revised in April and October, with more than 6,300 items set to see increases in October, up from 2,431 in August.”

“Subsidies aimed at capping higher petrol prices have had only limited effect at a retailer level, particularly outside bigger cities, and are set to end on Sept. 30.“

“Wholesale prices for durable goods, mostly imported, are also rising, putting pressure on retailers to up their own prices.”

Market reaction

USD/JPY is posting small losses amid a broadly weaker US dollar and a minor bounce in the Treasury yields. The US inflation data holds the key.

The spot was last seen trading at 134.88, down 0.09% so far.