BoJ’s Masu says central bank is not behind the curve in dealing with inflation
Bank of Japan (BoJ) policy board member Kazuyuki Masu said on Friday that central bank is not behind the curve in dealing with inflation. Masu further stated that BoJ shouldn't raise rates too quickly in a way that derails Japan's economic recovery.
Key quotes
BoJ is not behind the curve in dealing with inflation.
Not thinking of particular pace of rate hike.
It's obvious BoJ shouldn't raise rates too quickly in a way that derails Japan's economic recovery.
I'm not saying that food prices are rising in a way that needs immediate policy action.
Don't have specific timeframe in mind on how soon boj should raise rates to levels deemed neutral to economy,
BoJ should scrutinise economic developments and guide policy in an appropriate way so that underlying inflation moves around 2%.
It would be wrong to have preset idea in mind on how soon to raise rates.
If there is sufficient data that convinces us we should act, then we should act without hesitation.
Market reaction
As of writing, the USD/JPY pair is down 0.21% on the day at 156.70.
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.
