July Summary Of Opinions Point To Further Gradual Policy Normalization

The July BoJ Summary of Opinions provided a wide set of views, which is typically the case. See this link for the full break down of viewpoints.

• On the economy - "It is likely to keep growing at a pace above its potential growth rate, as a virtuous cycle from income to spending gradually intensifies." This reflects pass through from wage gains to consumption.
• On prices - "The likelihood of achieving the inflation target has increased further. That said, upside risks to prices require attention, since a rising number of industries have seen supply shortages and excess demand as a result of labor shortages."
• Such a backdrop points to further policy normalization, although this is likely to be in a gradual manner and watching how price and growth trends evolve.
• Most opinions on monetary policy were of the view a further policy adjustment could take place, given how the economy was evolving. Neutral rate at around 1% and that policy adjustments should be gradual.
• Real rates remain very low by historical standards and that a rate rise to 0.25% will still leave policy very accommodative.
• On tapering JGB purchases, "In order to allow interest rates to be determined by the market, the Bank should, in principle, proceed with the reduction of its purchase amount of JGBs according to the plan, in a straightforward manner."
• Overall, the summary of opinions doesn't appear to have produced any meaningful hawkish surprises relative to the day of the BoJ's policy announcement and Ueda's press conference.
• We also had the Deputy Governor's dovish speech yesterday, which came after strong market turbulence in recent sessions.