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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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Free AccessMNI INSIGHT: BOJ Policy Could Pivot With Changing Price Views
Bank of Japan officials are focused on whether inflation expectations among corporates and households have strengthened enough, and can be sustained amid high geopolitical uncertainty and energy costs, to cautiously look at fresh policy options, MNI understands.
TANKAN, WAGES
A clearer picture will come in the March Tankan survey due out on April 1, but it is expected that corporate views on the deflationary mindset are changing, which could lead to wage hikes, reinforcing medium- to long-term inflation expectations.
Higher wages are the key to meeting the BOJ's 2% sustained inflation target and if companies, particularly smaller ones, follow through with more pay the BOJ could see the change as sustained and then consider policy options.
THE CURVE
BOJ officials want to avoid getting behind the curve on inflation, but still seek a cautious approach because current higher prices are driven by energy costs that are seen as cost-push, not demand-pull, and therefore not sustainable, MNI understands.
BOJ officials, past and present, said the BOJ however needs to avoid a situation facing the U.S. Fed of potential rapid rate hikes to tame high inflation that could bring market volatility.
HOUSEHOLDS
Households too are key because their spending habits will be shaped by any gains in retail prices even if wages are increased, which would also have a major effect on medium- to long-term inflation expectations.
If high retail prices were accepted by households, it will strengthen a virtuous cycle from CPI increases to wage hikes and then to longer-term inflation expectations.
Japan’s March Tokyo CPI rose 0.8% y/y, according to data reported on Friday, showing the impact of higher energy costs.
Also on Friday, Bank of Japan Governor Haruhiko Kuroda and Finance Minister Shunichi Suzuki warned that rapid forex moves are undesirable, highlighting how policymakers are looking at the yen and 10-year government bond yield as well as inflation in judging any policy responses, see: MNI BRIEF: BOJ's Kuroda, MOF's Suzuki Want Orderly Yen Trade.
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Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.