Bank of Japan (BoJ) Governor Kazuo Ueda noted late Wednesday that the BoJ continues to grapple with igniting inflation expectations in Japan. While most major central banks around the globe weight rate cuts in the face of declining inflation after a longer-than-expected period of price growth outpacing incomes, Japan has lapped the entire race from last to first, having never seen rate-lifting inflation fires to begin with and still struggling to kick off price increases after decades of stagnant inflation metrics.
Key highlights
The BoJ is still maintaining a fairly easy monetary stance.
The BoJ wants to lift inflation expectations to a new level.
Japan labor shortages are positively affecting wages.
Underlying inflation has been rising slowly.
It’s still taking time for us to get to 2% inflation in a sustainable manner.
When there’s huge uncertainty, you usually want to proceed cautiously and gradually.
The problem is if you proceed very very gradually and create expectations that rates are going to stay at low levels for a very long time, this could lead to a huge build-up of speculative positions.
There are sometimes significant effects of monetary policy changes in other countries on our economy and inflation, so we look at what happens in the US, Europe very carefully.
It’s very hard to pin down the appropriate size of rate hikes from here.
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