BOJ Deputy Governor Himino says Japan’s real interest rate remains very low
- Appropriate to continue raising rates in line with improvements in the economy and prices
- Notes there are both upside and downside risks to the outlook for growth and inflation
- BOJ wants to scrutinise without preset assumptions whether baseline projections materialise
- Japan–US trade agreement is major progress, reduces uncertainty over Japan’s outlook
- But uncertainty remains around trade policy impacts and the outcome of US–China talks
- Global economic uncertainty remains high
- Trade policy’s impact on Japan’s economy may not prove significant
- Baseline scenario is for corporate profits to come under pressure from global slowdown and trade policy
- There is both Chance trade policy impact could be smaller or bigger than expected, must focus on possibility it could be bigger than expected
- BOJ’s baseline scenario is for underlying inflation to stagnate but eventually reach 2%
- Underlying inflation is recently quite close to 2% but has yet to reach that level
- Risks, uncertainty will never disappear, so we must assess balance of upside, downside risks and respond in timely and appropriate manner
- Monetary easing, tightening should primarily be conducted by adjustment to short-term policy rate, not by adjustment of amount of BOJ’s JGB buying
- To restore sound functioning of JGB market, it is desirable to bring level of BOJ’s buying down
The yen is showing some weakness after Himon has spoken. While rate hikes are coming, there is no rush.
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This article was written by Eamonn Sheridan at investinglive.com.
