BoJ summary of opinions: BoJ must maintain current monetary easing until inflation stably exceeds 2%


The Bank of Japan's September meeting's summary of opinions states that Japan's core consumer inflation is likely to accelerate toward the year-end with a narrow pace of increase thereafter.

Key notes

  • Expect wide range of goods to see price rises ahead.
  • Challenges remain to achieve boj's 2% inflation target as yet to confirm japan will see sustained wage rises.
  • We must be humble, carefully scrutinise without any preset idea risk japan's inflation may sharply overshoot expectations including via fx moves.
  • We must scrutinise wage moves, mechanism behind japan's price moves as existing indicators swayed largely by import price moves.
  • There is chance japan will see high wage growth given tight labour market.
  • Pandemic-relief programme ought to be phased out as japan only half-way in seeing end to pandemic
  • BoJ must maintain easy policy as output gap remains negative, even though there is significant risk inflation may overshoot expectations.
  • BoJ must maintain current monetary easing until inflation stably exceeds 2%, driven by rise in trend such as services prices.
  • No immediate need to change monetary policy guidance now as we are in a phase where close scrutiny needed on whether japan will see positive cycle of wage, prices.
  • Some point to interest rate divergence as factors driving yen declines.
  • Desirable to maintain current foward guidance with dovish bias as impact of pandemic uncertain, inflation likely to slow next fiscal year and onward 
  • When right timing comes, important to have appropriate communication with market on exit strategy from easy policy.

USD/JPY under pressure

Meanwhile, financial markets have been in turmoil which has been playing into the hands of the US dollar. With that being said, bears are moving into USD/JPY as follows:

144.60/70 is the support structure and a close below here on an hourly basis could be significant and open the way for a run on liquidity below 144 the figure. 

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