© Reuters. FILE PHOTO: Bank of Japan Governor Kazuo Ueda attends a press conference after their policy meeting at BOJ headquarters in Tokyo, Japan December 19, 2023. REUTERS/Issei Kato
(Reuters) – The Bank of Japan maintained ultra-easy monetary settings on Tuesday in a widely expected move, as policymakers allow more time to determine whether wage increases will broaden enough to keep inflation sustainably at its 2% target.
Following are excerpts from BOJ Governor Kazuo Ueda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
WAGE-INFLATION CYCLE
“Prospects of higher wages are gradually affecting sales prices, which is leading to a gradual increase in service prices.”
“If we get further evidence that a positive wage-inflation cycle will heighten, we will examine the feasibility of continuing with the various steps we are taking under our massive stimulus programme. We can’t say now how it specifically will look like. But we think we can avoid any big irregularity (in the event we shift policy).”
PRICE TARGET
“We were able to confirm that the economy is moving in line with our projections on inflation … Our core-core inflation forecast is at 1.9%, very close to our 2% target. This was the case in October but it happened again this time, after close scrutiny. This is the biggest factor that made us more convinced than before that the likelihood (of sustainably achieving our price target) is gradually heightening.”
WHEN ASKED WHETHER AN EXIT FROM NEGATIVE RATE POLICY IS NEARING
“The prospects of seeing trend inflation hit 2% are gradually heightening. That’s a desirable development. But it’s hard to quantify how close we’ve come.”
WOULD BOJ HAVE IN MIND THE FUTURE INTEREST RATE PATH WHEN IT ENDS NEGATIVE RATES?
“Yes, that is obviously the case. Based on our current economic and price forecast, we think we can avoid the risk of a severe, irregular policy shift.”
ON WHETHER AN END TO NEGATIVE RATES WILL LEAD TO CONSECUTIVE INTEREST RATE HIKES
“If we were to make the decision (of ending negative rates), that will be based on our understanding that sustainable achievement of our price target can be foreseen.”
ON IMPACT OF CONSUMPTION ON SERVICE PRICE OUTLOOK
“It’s true the recent move in service prices is clearly driven by several one-off factors. It’s also true that the weakness in consumption is affecting service prices. That’s why we are trying to extrapolate the trend stripping away such factors. When we do so, we still think service inflation is gradually accelerating as a trend. The focus ahead will be whether wage hikes will spread to prices, particularly service prices.”
“Based on our current economic forecast, even if we were to end negative rates, monetary conditions will likely remain very accommodative.”
REAL WAGES
“If we expect real wages to remain negative for a very long period of time, that means achievement of our price target will be distant. But if we can foresee real wages turning positive, the fact real wages are negative now won’t necessarily prevent us from normalizing monetary policy.”
ON HOW THE BOJ WILL GAUGE THE OUTLOOK FOR SMALLER FIRMS’ WAGE HIKE PROSPECTS
“If we were to wait for the outcome of all firms’ wage negotiations, including smaller firms, that will take a very long time. Even if we don’t have wage data, we can look at various economic moves in predicting the outcome of smaller firms’ wage outlook. We also have data from hearings. Big firms’ wage talk outcome will also affect that of smaller firms. Data on smaller firms’ profit outlook will also become available earlier than that on wages.”
ASSET-BUYING FRAMEWORK
“We aren’t buying ETFs much now but have an asset-buying framework still in place. If we can foresee inflation sustainably hit 2%, we will look into whether we maintain, or discontinue, the framework.”
ON WHETHER THE BOJ WILL MAINTAIN YCC, OR BIG BOND BUYING, EVEN AFTER ENDING NEGATIVE RATES
“As for our bond buying operation, we’d like to avoid causing big disruption in the continuity of our policy.”
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