On a panel at a live IMF/World Bank meeting, the Governor of the Bank of Japan, Haruhiko Kurodareiterated its dovish stance that although Japan’s inflation rate may hover around 2.0% for the time being, the BoJ should persistently continue its current aggressive monetary easing to achieve its 2.0% inflation price target on a sustainable basis, reported Reuters.
Featured Statements
- The rise in services inflation has been limited, indicating that inflation in Japan has not been as widespread as in the US.
- An increase in commodity prices leads to a net outflow of income from Japan’s economy.
- Since Japan is a commodity importer, a rise in commodity prices pushes the economy down through a decline in real household income and corporate profits.
- Japan’s output gap remains negative and economic overheating has not been a cause for concern.
- The BoJ’s monetary policy should be to provide accommodative financial conditions and support the achievement of a full economic recovery.
- Japan’s economy appears to be more resilient to rising commodity prices than it was in 2008.
- There is still ample room for pent-up demand to materialize as the impact of COVID-19 subsides.
- Japan’s inflation is expected to rise in the short term, but the rise is mainly cost-driven inflation and therefore lacks sustainability.
- In Japan, the current rise in commodity prices due to supply factors is unlikely to immediately lead to a sustained rise in wages and prices.
- The BoJ will continue to carry out policy under its current framework of yield curve control.
- Even with a cost increase shock like the current one, the BoJ has not faced the dilemma between prioritizing economic stability or price stability, unlike other central banks.
- The role of the BoJ in the current context is perfectly clear and that is to strongly support Japan’s economic recovery.
- The BoJ will carefully examine various risks, including Covid-19, and continue to conduct monetary policy appropriately under the control of the yield curve.
market reaction
The yen has been under some selling pressure in recent trading in the wake of Kuroda’s latest dovish comments.
Source: Fx Street
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