December 19, 2024
On Thursday, on the sidelines of the press conference following today's interest rate decision, Bank of Japan Governor Kazuo Ueda made a number of statements regarding the path of monetary policy and the Japanese economic situation, explaining the reasons behind not changing the interest rate at this meeting. In this regard, Kazuo Ueda stated the following points:
Japan's economy is recovering moderately despite recent weakness.
There is uncertainty surrounding Japan's economy and prices remain high.
Caution should be exercised regarding the effects of currency market movements on the Japanese economy and prices.
The impact of Forex on prices has become greater than in the past, as companies tend to raise wages and, consequently, prices.
The Bank of Japan will maintain a certain pace of monetary policy easing if economic and price expectations are met.
We need to see additional information on wage trends and expectations.
Current economic indicators suggest that economic activity is moving largely in line with the Bank of Japan's expectations.
We will guide policy from the perspective of achieving the inflation target in a sustainable manner and using the outcomes of the comprehensive review.
At this time, there is little information available on wage trends, so we refrain from commenting on forecasts.
We do not consider ruling out the use of unconventional monetary policies in the future.
The Bank of Japan's decision today to hold interest rates steady was based primarily on an assessment of wage trends, uncertainties about external economies and the policies of the incoming US administration.
But that doesn't mean we need all the data to make monetary policy changes.
Import prices are stable compared to last year.
We need to assess the situation over a long period of time regarding wages or the Trump administration.
It will take a long time to see the full picture of the wage increase and Trump's policies.
The policy decision in January will be "comprehensive" with data available at that time.
Trump's tariff policies and retaliatory tariffs could have a major impact on Japan's economy.
The pace of rate hikes was gradual because core inflation and inflation expectations were rising slowly.
Slowing core inflation and price expectations movements mean the Bank of Japan does not raise interest rates at every meeting.
We need a “step further” before deciding to raise interest rates further, and sustaining wage increases is the step further.
We are aware that the pace of rate hikes to reach the neutral rate will become faster if we postpone the timing of the rate hike.
The big picture on wage trends will become clearer in March and April.
We need to incorporate other data to make policy decisions until then.
