Bank of Japan Governor Kazuo Ueda reaffirmed the central bank’s commitment to supporting the economy with ultra-loose monetary policy while indicating growing confidence in inflation momentum.
Ueda’s remarks come as markets eagerly anticipate clues regarding the timing of the next interest rate hike.
Ueda stated that as the BOJ gradually exits its massive stimulus program, it will slowly shrink the size of its balance sheet and eventually reduce government bond purchases. This move signals the central bank’s intention to normalize monetary policy at a measured pace.
Concerns Over Inflation Overshoot Prompted Timely Policy Adjustment:
Addressing concerns about the pace of policy adjustment, Ueda emphasized that waiting too long for inflation to reach the 2% target could lead to an inflation overshoot.
He highlighted the importance of supporting the economy and prices by maintaining accommodative monetary conditions while inflation expectations accelerate. The yen’s recent depreciation has raised concerns among Japanese policymakers.
Finance Minister Shunichi Suzuki emphasized the government’s high sense of urgency in monitoring currency movements, indicating the possibility of intervention to stabilize the yen.
Outlook and Economic Indicators:
The market awaits further developments amidst expectations of potential currency intervention.
Market focus shifts to upcoming economic data for insights into the strength of Japan‘s economic recovery and its implications for future monetary policy decisions.
Recent data showed positive trends, including growth in exports for a third consecutive month and improved confidence among major Japanese companies, despite slight fluctuations in manufacturers’ sentiment.
