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MNI STATE OF PLAY: BOJ Kuroda Rules Out Early Tightening

TOKYO (MNI)

Bank of Japan Governor Haruhiko Kuroda on Tuesday completely ruled out the possibility of unwinding easy policy or changes in policy rates before the 2% price target is achieved in a stable manner.

Kuroda told reporters that the BOJ board did not discuss a rate hike or a change of easy policy. “I don't think about a rate hike or a change of easy policy absolutely, and we didn’t discuss them,” Kuroda said.

He added that the BOJ predicts the core inflation to rise to around 1% but it will be at toward the end of the projection period. He also that it is very unlikely that Japan’s core inflation rate will rise to 2%, see: MNI INSIGHT: New BOJ Policy Options Need A Look (RPT).

REMARKS ON YEN

As for the impact of the weak yen, Kuroda maintained the view it has a net positive impact on the economy and prices, although the yen weakened further slightly from one month ago.

“Foreign exchange rates should move stably reflecting economic fundamentals. The weak yen contributes to boosting economic activities and prices. The picture hasn’t been changed,” Kuroda told reporters.

POLICY VIEWS

Earlier in the day, the BOJ board decided to stand pat on monetary policy as the economy largely continued moving in line with the baseline scenario despite increasing uncertainties amid the spread of omicron variants.

As for closely watched forward guidance for the policy rates as a prelude of future policy change, the BOJ kept the wording that policy rates are “to remain at their present or lower levels,” showing that it is premature for market players to see unwinding of easy policy or rate hikes.

“For the time being, the BOJ will closely monitor the impact of Covid-19 and will not hesitate take additional easing measures if necessary,.

OUTLOOK FORECASTS

The BOJ board upgraded its forecasts for real economic growth and inflation rate in the next fiscal year to +3.8% and to +1.1% from October’s +2.9% and +0.9%, respectively and the first time since April 2014 wording was used that cited the risks to prices are balanced.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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