Bank of Japan board member Noguchi:
- Japan’s economy is growing steadily
- Japan’s economy is currently shifting to a new phase where sustainable inflation is realized accompanied by wage increases
- Downside risks to Japan economy stemming from overseas economies have rapidly heightened due to U.S. tariff policies
- BOJ likely to keep adjusting policy rate while carefully examining whether underlying inflation would be stabilising around 2%
- BOJ shouldn’t pre-set terminal rate in raising rates
- BOJ should spend time gauging impact of each rate hike on economy, scrutinise risks, before moving to next hike
- 10-year JGB yield rose near 1.6% in March but I didn’t see it as disruptive as it reflected change in market’s view on terminal rate
- Personally don’t see need to make big changes to existing BOJ taper plan
- As for taper plan for April 2026 onward, we need to examine with a longer-term perspective
- BOJ can spend sufficient time reducing its balance sheet, doing so is desirable for market stability
- BOJ is maintaining loose monetary policy as rise in inflation is mainly driven by import costs, not necessarily sustainable
- Monetary policy must focus on underlying price moves that are strongly linked to nominal wage developments
- Wage, domestic demand-driven price pressure not strong enough but steadily increasing
- Our basic monetary policy stance should be to cautiously move on policy adjustment while scrutinising economy and its risks
more to come
An oft-repeated line from the BoJ is that as long as inflation and economic targets are being hit, then rates will rise. Noguchi hasn’t said this exactly but it seems to be his overall message. I’d say he is sounding more dovish than hawkish though. Comments welcome!
This article was written by Eamonn Sheridan at www.forexlive.com.
