Japan Ueda Governor "Delay in Inflation Slowdown... Considering Surprise Announcement"

Kazuo Ueda, Governor of the Bank of Japan (BOJ), reaffirmed his stance on maintaining the monetary easing policy, stating that "it will take time for Japan's inflation to sustainably remain in the 2% range." However, he noted that the timing for inflation to enter a slowdown phase is later than expected, and there could be a surprise announcement regarding policy adjustments at a certain point.

On the 16th, Governor Ueda expressed these views on Japan's inflation during a press conference following the monetary policy meeting. Since the BOJ's assessment of inflation determines the direction of Japan's monetary policy, Governor Ueda's thoughts on inflation are a primary focus for the market.

Governor Ueda expressed a negative view on whether Japan's inflation has stably reached the 2% range. As of April, Japan's Consumer Price Index (CPI) rose 3.4% year-on-year, marking 20 consecutive months of increase. However, Governor Ueda judged this trend to be a temporary phenomenon caused by rising international raw material prices. Since wage increases and economic growth have limited impact on inflation, he said it is uncertain whether the inflationary trend will continue beyond next year.

He emphasized, "Economic uncertainties surrounding Japan are very high, including overseas economies and raw material price trends due to the Russia-Ukraine war. We will achieve the inflation target (in the 2% range) by monitoring wage increase trends while continuing monetary easing policies."

However, he noted that the timing for inflation to enter a slowdown phase is later than initially expected. This acknowledges a change in the BOJ's inflation forecast scenario. Accordingly, he stated, "At a certain point, it may be somewhat inevitable to make a surprise announcement regarding adjustments to monetary policy, such as the Yield Curve Control (YCC) policy and short-term interest rate changes."

Meanwhile, the BOJ announced that it will maintain the existing monetary easing policy after concluding its two-day monetary policy meeting. Accordingly, the short-term interest rate remains fixed at -0.1%, and the allowable fluctuation range for the 10-year government bond yield, a long-term interest rate indicator, remains at ±0.5%. The BOJ also decided to continue purchasing index-linked Exchange Traded Funds (ETFs) to increase the money supply in the market.

This content was produced with the assistance of AI translation services.