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BoJ Governor Ueda (post-policy presser) says, must pay attention to even small FX moves as underlying inflation approaches 2%

Governor Ueda’s comments indicate a nuanced approach from the BoJ as they navigate inflation dynamics.

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BoJ Governor Ueda (post-policy presser) says, must pay attention to even small FX moves as underlying inflation approaches 2%

BoJ Governor Ueda (post-policy presser) says will conduct nimble market operations to respond to irregular moves; will work closely with the government on long-term rates. Operations could be conducted to encourage stable yield formation.

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  • On JGBs, says, must be mindful of the fact that demand-supply of super-long JGBs have been unstable due to end-FY factors.

Inflation:

  • Will place larger focus on underlying inflation in making policy decisions.
  • On average, the Board still thinks there is some distance to the 2% inflation target.
  • Compared to October, likelihood of achieving 2% target heightening; but, compared to December the likelihood is not that different.
  • Are hearing more voices that price hikes are reflecting wage growth. 
Context

Attention to even small FX shifts signals a potential for increased volatility in JPY and markets sensitive to Japanese monetary policy, especially if inflation is perceived as nearing the target. The mixed signals regarding the timeline to reach the 2% target suggest that while the BoJ is increasingly aware of inflation trends, they remain cautious about immediate policy adjustments.

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