Speaking at the post-policy meeting press conference on Friday, Bank of Japan (BoJ) Governor Kazuo Ueda said that the Bank “will adjust the degree of monetary easing if underlying inflation rate rises,” adding that “easy financial conditions will be maintained for the time being.”
The BoJ kept the interest rate on hold at 0% following the April meeting.
Additional quotes
Japan's economy has recovered moderately, although some weakness has been seen.
Must pay due attention to financial, FX market moves, impact on Japan's economy, prices.
Monetary policy conduct depends on future economic, price, financial conditions.
Economic outlook, risk overshoot may also be a reason for policy change.
Monetary policy is not aimed to control FX rates directly.
If FX fluctuations affect underlying inflation, that could be a consideration for monetary policy.
Although main reason for FY2024 inflation outlook upgrade is higher crude price, weak Yen had impact to some extent.
Likelihood of achieving 2% inflation target is gradually rising.
Reduction of JGB buying in future is in sight.
Not want to use reduction of JGB buying as a proactive monetary policy tool.
Will carry out appropriate short-term rate adjustment, taking effect of BoJ’s JGB holding on long-term yield into consideration.
FX's impact on inflation rates is usually tentative.
Chance of prolonged weak Yen is not zero.
We can preemptively judge if weak Yen affects underlying inflation, spring wage talks next year.
No change to JGB buying amount from March.
Future reduction of JGB buying will be decided at policy board.\
Achievement of 2% inflation target is 'extremely close' if our FY25, 26 inflation forecasts materialise.
When our inflation outlook materialises, that's almost in the state of neutral rate of interest.
Will evaluate future underlying inflation based on service prices, weak yen-induced import price hikes, corporate wage, price-setting behavior.
There was no opposition to maintaining 6 trln yen JGB purchases at today's meeting.
Market reaction
USD/JPY rises back to test 156.00 following these comments. The pair was last seen 0.25% higher on the day at 156.03.
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 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.
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.
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.
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