BOJ’s Ueda: Accommodative financial conditions, stimulus are supporting Japan's economy
The Bank of Japan (BoJ) Governor Ueda said on Thursday that accommodative monetary policy and the effects of economic stimulus measures are supporting the Japanese economy, per Reuters.
Key quotes
“Japan's economy to continue recovering moderately, supported mainly by accommodative financial conditions and effects of economic stimulus measures.”
“Uncertainty over Japan's economy extremely high.”
“Closely watching the impact of financial, forex markets on the Japanese economy, prices.”
“Will patiently continue monetary easing under YCC to support economic activity, the cycle of wage growth.”
“We have not yet reached a situation in which we can achieve price target sustainably and stably and with sufficient certainty.”"BoJ has not made decision on which interest rate to target once we end negative interest rate policy."
"Options include raising rate applied to financial institutions' reserves at BoJ, or revert to policy targeting overnight call rate."
"Don't have any specific idea in mind on how much we will raise rates once we end negative rate policy."
Market reaction
At the time of writing, the USD/JPY pair is trading around 147.05, down 0.22% on the day.
Bank of Japan FAQs
What is the Bank of Japan?
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%.
What has been the Bank of Japan’s policy?
The Bank of Japan has embarked in an ultra-loose monetary policy since 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.
How do Bank of Japan’s decisions influence the Japanese Yen?
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
Is the Bank of Japan’s ultra-loose policy likely to change soon?
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
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.
