BOJ’s Kuroda: Japan absolutely not in situation that warrants tightening monetary policy

Bank of Japan (BOJ) Governor Haruhiko Kuroda explicitly dismisses expectations of monetary policy tightening in the coming months.

Key quotes

Japan is absolutely not in situation that warrants tightening monetary policy.

Our biggest priority is to support Japan’s economy by continuing with powerful monetary easing.

Japan does not face trade-off between economic, price stability and so can continue to stimulate demand with monetary policy

Wages and prices must mutually rise in order for Japan’s inflation to stably hit 2%.

BOJ will be unwavering in its stance of maintaining monetary easing to ensure recent rise in inflation expectations lead to sustained price rises.

Recovery in Japan’s consumption, capex is weaker than in the US, euro-zone economies.

BOJ must cushion blow from falling real income, driven by rising raw material costs, on households, firms by maintaining easy monetary policy.

Weak yen pushes up both export, import prices so its impact on terms of trade is roughly neutral.

Important for Japan’s consumer inflation to achieve 2% on average, not temporarily.

Amount of BOJ’s bond buying has not increased much despite BOJ’s recent decision to offer unlimited buying of 10-year JGBs at 0.25%.

Fed's policy response will likely contribute to stable global growth, though must be mindful of risks such as possible stock market adjustment, capital outflows from emerging markets.

Must maintain monetary easing to prolong tight job market, prod firms to match wage increase with pace of price rise.

Japan households are becoming more accepting to price rises, which is an important change in terms of achieving BOJ’s price goal.

Households' forced savings, accumulated during covid pandemic, may have made them more accepting to price rises.

Market reaction

USD/JPY is finding a floor near 130.20 on BOJ Chief Kuroda’s dovish comments. The spot is trading at 130.59, down 0.21% on the day.