MNI BOJ WATCH: Ueda Gives No Signal For January Policy Exit

Bank of Japan Governor Kazuo Ueda failed on Tuesday to lay any foundation for an exit from easy policy at the next meeting in January, saying it was still difficult for to demonstrate a high probability of achieving the 2% inflation target.

“The probability of achieving the 2% price target in a stable and sustainable manner in fiscal 2025 has increased from November, but the Bank still needs to ascertain the strengthen of the wage-price cycle,” Ueda told reporters after the BOJ left policy unchanged in its December meeting.

When asked about the chance of policy changes in January, Ueda indicated that it was unlikely sufficient data would be available to justify a change by then.

The governor said he would focus on wage hikes next year and on whether they filter through to prices. He said that policymakers did not discuss whether the BOJ should avoid shifting its easy policy in March, the end of Japan’s fiscal year, which could hit profits at commercial banks.

COMMUNICATIONS

It will be impossible for the Bank to avoid some degree of surprise to markets when it shifts away from its current yield curve control settings and negative rates, but the BOJ will make efforts to communicate its thinking as new information becomes available, Ueda said. (See MNI POLICY: Solid Wage Data Needed Before BOJ April Exit Talk)

Federal Reserve rate cuts expected in 2024 will not impede the conduct of monetary policy for the BOJ, which responds to its own economic and price conditions, he said, adding that falling U.S. inflation is due to supply side improvements which will prove positive for both the U.S. and Japanese economies.

Earlier on Tuesday, the BOJ board decided unanimously to keep its yield curve control policy and its negative interest rate on excess reserves, and pledged to patiently continue with monetary easing amid high uncertainties around the global economy and financial markets.

The BOJ also kept forward guidance for policy rates and pledged to take additional easing measures if necessary to achieve its target.

It slightly downgraded its assessment on capital expenditure, which has fallen short of companies' plans, but the BOJ sees a moderate recovery on the back of high corporate profits. (See MNI POLICY: Economic Concerns Weigh On BOJ's April Exit Plan)

The BOJ’s next policy-setting meeting, including its Outlook Report, is scheduled for Jan 22-23 after its quarterly branch managers’ meeting on Jan. 11.