Bank of Japan Governor Kazuo Ueda spoke on Monday.
Justin had the main headlines here:
Ueda was addressing a meeting of Councillors of Keidanren (Japan Business Federation). Keidanren is a significant organisation in Japan with close links to Japan’s ruling Liberal-Democratic Party. It provides advice to the government on economic issues. Last week the lobby group were on the pulpit with advice for the central bank:
More comments from Ueada from the event (headline summary via Reuters, bolding below is mine):
-
Service prices gradually
accelerating pace of increase, though it seems many firms feel it is
not easy to pass on rising labour costs -
If positive wage-inflation
cycle strengthens, and heightens prospects of sustainably achieving
price target sufficiently, we will consider changing monetary policy -
We can not pre-set timing of
future policy change, but will like to make appropriate decision
while scrutinising economic developments, firms’ wage and
price-setting behaviour -
In an economy where positive
inflation is sustained, nominal rates will be high and give central
bank scope to cut interest rates sharply when necessary -
When monetary policy functions
effectively, that means risk of economy worsening sharply or
returning to deflation will diminish -
BOJ patiently maintaining
monetary easing to ensure signs of change in firms’ wage,
price-setting behaviour is sustained -
BOJ will carefully examine
economic developments, including whether positive wage-inflation
cycle will strengthen, and make appropriate decision towards
sustainably hitting price target
- Prospect of achieving price
target gradually heightening -
It may take some time but
upward pressure from past rises in import prices will likely
gradually ease -
I am hoping Japan will finally
emerge low-inflation environment, achieve positive wage-inflation
cycle -
Unlikely in past phases,
demand is underpinned by govt’s stimulus measures and BOJ’s continued
easy policy -
Companies’ views on medium-,
long-term price outlook showing signs of change - At this point, prospect of
achieving price target not high enough -
Uncertainty surrounding
domestic, overseas economy and price developments very high -
We must scrutinise how
companies’ wage, price-setting behaviour changes -
Key point is whether clear
wage hikes will continue in next year’s annual wage negotiations -
Crucial for increase in
corporate profits to lead to higher household income -
Key is whether companies will
be able to reflect rising labour cost to prices of their goods,
services
Ueda made positive noises, that the likelihood of achieving the inflation target was “gradually rising” and it would consider changing policy if prospects of sustainably achieving the 2% target increase “sufficiently”. Also note though that he said he is not there yet:
- At this point, the prospect of achieving the price target is not high enough
. And there is still much assessment and discussion on the timing to come:
- “We will carefully examine economic developments as well as firms’ wage- and price-setting behaviour, and thereby decide on future monetary policy in an appropriate manner,”
Speculation is not going away that a Bank of Japan pivot to tighter policy is imminent. We’ve been hearing the rumours for night on two years now and my current best guess is not before April. The next meeting January 22 and 23.
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Bank of Japan dates for the coming year: