BoJ Governor Ueda says the BoJ’s basic stance is to continue raising the policy rate in accordance with economic, price, and financial developments; bank will strive to fulfil its mandate of achieving price stability by means of appropriate policy

Policy:

• No signs that past rate hikes are curbing corporate fund demand.
• An accommodative financial environment is supporting the economic activity.
• If there is a chance of second-round effects, the BoJ must consider taking action.
• Japan's real interest rate is still low.
• The upside risks to prices appear to be greater overall and are likely to emerge sooner.
• If we delay the necessary response, we could be forced to raise rates sharply, which in turn would hurt the economy and impose a huge burden on markets and the financial system.

Energy / Middle East:

• This year’s oil price increase is not as large as in the first oil crisis, but it is comparable in magnitude to other shocks.
• Even if the situation regarding the Middle East remains unclear, it should be judged that upside risks to prices outweigh downside risks to economic activity, and the BoJ will need to thoroughly discuss the pros and cons of raising the policy rate.
• It is likely that a rise in crude oil prices will push up prices not only for energy, but also prices in general, particularly across a wide range of goods.
• Possibility cannot be ruled out that large-scale disruptions in supply chains will occur.
• Will scrutinise whether the economy has resilience to negative shock from the Middle East conflict.
• Japan's exports and output is moving sideways but output for electronic parts and chips are resilient, which is very important for the economy to avert severe risk scenario.
• Possibility of economic slowdown and the magnitude of its impact will ultimately depend significantly on the future course of the Middle East situation.

Wages:

• The environment in Japan has changed significantly compared with four years ago, as the country’s deflationary mindset has been dispelled and firms’ wage- and price-setting behaviour has become more active.
• Rengo results show that a wage growth rate of around 5% has been agreed by both large and small firms.
• If corporate wage and price-setting behaviour is active, price rises may spread more quickly.

Economy:

• BoJ will scrutinise the impact of supply shocks on the economy, how oil price rises affect prices of other goods and services, and underlying inflation.
• It is crucial not only in terms of preventing downward pressure on economic activity stemming from rising prices, but also for ensuring the stability of financial and capital markets.
• Economy is expected to continue growing moderately, albeit at a decelerated rate, likely to be underpinned by high levels of corporate profits, various economic policy measures, and accommodative financial conditions.
• If supply shock is big and sustained, that would have a bigger impact on underlying inflation.
• Must be mindful that current price rises may not prove temporary and lead to an overshoot in underlying inflation.

JGBs:

• The functioning of the JGB markets has been steadily improving as the bank makes headway in reducing its JGB purchase amount.
• Must keep an eye on the stability of the JGB market, and that market portfolio adjustment are likely to take some time.