On Wednesday, Bank of Japan (BoJ) board member Junko Nakagawa is making his scheduled speech, noting that “easy monetary policy is important for the time being, as it supports the economy.” The board member further stated that the BoJ will maintain their easy policy while taking steps to curb any potential side-effects. Nakagawa noted that the recent rise in inflation is mainly due to a spike in prices for a handful of goods, which is likely to slow their pace of increase.
The board member also commented on the Bank’s decision to widen the band around its yield target, which has led to a rise in yields. He noted that the merits of this decision, which is to improve bond markets, outweighs any potential drawbacks. Nakagawa also shared his outlook that Japan’s economy is likely to continue to expand above potential growth.
Nakagawa warned that if corporate inflation expectations overshoot, that could prod more firms to pass on higher costs to customers. He also pointed out that there is strong uncertainty on how much wages will rise and that there is a risk prices may come under downward pressure if wage hikes do not proceed as much as expected. The board member further pointed out that the BoJ is focusing on how much wage hikes will spread among smaller firms.
Following the speech, the USD/JPY pair is defending minor bids and is adding 0.06% on the day to trade at 136.27, as of writing.
The Bank of Japan’s decision to maintain their easy policy is an important step in supporting the economy. The board member’s comments on the recent rise in inflation and its potential side-effects are also important to note. The rise in inflation is mainly due to a spike in prices for a handful of goods, which is likely to slow their pace of increase.
The Bank’s decision to widen the band around its yield target has led to a rise in yields, but its merits of improving biond markets outweighs. Japan’s economy is likely to continue to expand above potential growth, however, there is strong uncertainty on how much wages will rise. There is a risk prices may come under downward pressure if wage hikes do not proceed as much as expected, which is why the BoJ is focusing on how much wage hikes will spread among smaller firms.
The USD/JPY pair is currently defending minor bids following the speech and is adding 0.06% on the day to trade at 136.27, as of writing. This suggests that the market is reacting positively to the board member’s comments and the BoJ’s decision to maintain their easy policy.
In conclusion, the Bank of Japan’s decision to maintain their easy policy is an important step in supporting the economy. The board member’s comments on the recent rise in inflation and its potential side-effects are also important to note. The Bank’s decision to widen the band around its yield target has led to a rise in yields, but its merits of improving biond markets outweighs. The market is reacting positively to the board member’s comments and the BoJ’s decision to maintain their easy policy, as evidenced by the USD/JPY pair defending minor bids and adding 0.06% on the day to trade at 136.27, as of writing.