The vice governor of the Bank of Japan (BOJ), Shinichi Uchida, said on Tuesday that “there are both risks up and down due to US tariffs on Japan’s prices.”
Additional comments
- The US tariffs exert down pressure on Japan’s economy.
- Japan’s economic growth is expected to slow down around its potential before resuming moderate growth as foreign economies recover.
- The Japan production gap is expected to be maintained around the current levels, after which its improvement will resume towards the end of the three -year projection period of the BOJ until fiscal year 2027.
- The BOJ is expected to continue increasing interest rates if the economy and prices improve how we project.
- Japan underlying inflation and medium and long -term inflation expectations are probably temporarily stuck.
- But even during that period, wages are expected to continue increasing since the Japan labor market is very tight, and companies will probably continue to transfer the increase in labor costs.
- Once the global economy resumes an upward trend, it is likely that Japan’s economy will recover and increase underlying inflation and inflation expectations.
Market reaction
USD/JPY maintains the tone offered intact after these headlines, lowering 0.38% in the day to 147.88 at the time of writing.
Japan Faqs Bank
The Bank of Japan (BOJ) is the Japanese Central Bank, which sets the country’s monetary policy. Its mandate is to issue tickets and carry out monetary and foreign exchange control to guarantee the stability of prices, which means an inflation objective around 2%.
The Bank of Japan has embarked on an ultralaxa monetary policy since 2013 in order to stimulate the economy and feed inflation in the middle of a low inflation environment. The bank’s policy is based on the Quantitative and Qualitative Easing (QQE), or ticket printing to buy assets such as state or business bonds to provide liquidity. In 2016, the Bank redoubled its strategy and relaxed even more policy by introducing negative interest rates and then directly controlling the performance of its state bonds to 10 years.
The massive stimulus of the Bank of Japan has caused the depreciation of the Yen in front of its main monetary peers. This process has been more recently exacerbated due to a growing divergence of policies between the Bank of Japan and other main central banks, which have chosen to abruptly increase interest rates to combat inflation levels that have been in historical maximums. Japan Bank’s policy to maintain low types has caused an increase in differential with other currencies, dragging the value of YEN.
The weakness of the YEN and the rebound in world energy prices have caused an increase in Japanese inflation, which has exceeded the 2% objective set by the Bank of Japan. Even so, the Bank of Japan judges that the sustainable and stable achievement of the 2%objective is not yet glimpsed, so an abrupt change of current monetary policy seems unlikely.
Source: Fx Street
I am Joshua Winder, a senior-level journalist and editor at World Stock Market. I specialize in covering news related to the stock market and economic trends. With more than 8 years of experience in this field, I have become an expert in financial reporting.
