BOJ's Noguchi: Must maintain pandemic-relief lending programmes

The Bank of Japan (BOJ) monetary policy board member Asahi Noguchi is back on the wires now, via Reuters, commenting on the central bank’s policy outlook.

Key takeaways

BOJ must maintain pandemic-relief lending programmes as long as there is a risk of another wave of covid infections.

When withdrawing pandemic-relief support, must ensure the move does not hamper the BOJ effort to hit  the 2% price goal.

BOJ may have little choice but to extend pandemic-relief support unless it becomes clear Japan’s economy can return to a pre-pandemic state.

Rising raw material prices worsening Japan’s terms of trade but corporate profits remain strong.

If rise in raw material prices is prolonged and companies cannot pass on costs to customers, that could hurt corporate profits.

If pent-up demand props up Japan’s economy, domestic prices, wages may start to rise and offset worsening terms of trade from rising raw material costs.

Don't see immediate need to top up stimulus.

Additional easing may become necessary if Japan’s job market does not improve from pent-up demand.

Don't see big risk of Japan sliding into stagflation.

Market reaction

The yen remains heavily offered amid the latest comments from the BOJ policymaker and government official, as Japan dissolves its parliament ahead of the general elections.

The uptick in the Treasury yields is also helping the advance in USD/JPY, as it now trades at 113.54, adding 0.28% on the day.