BOJ New Governor at G20 Ministerial Meeting: "Japan to Maintain Financial Easing"

Kazuo Ueda, Governor of the Bank of Japan (BOJ), expressed his intention to continue the accommodative monetary policy to the central bank governors of the Group of Twenty (G20). The reason is that Japan's inflation rate has not yet reached the 2% level.

According to Bloomberg, Governor Ueda attended the G20 Finance Ministers meeting held in Washington, D.C. on the 13th (local time) and stated, "We will maintain the current monetary easing policy to continuously and stably achieve the 2% price stability target."

Kazuo Ueda, Governor of the Bank of Japan. [Image source=Yonhap News]

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He further forecasted at a press conference after the meeting that "Japan's consumer price inflation, currently around 3%, is expected to fall below 2% in the second half of this year." Japan's core Consumer Price Index (CPI) peaked at 4.2% in January and then declined to 3.1% in February, marking a downward trend for the first time in 13 months. Since May last year, Japan's inflation has bypassed the BOJ's 2% target range, but the BOJ views this as a temporary phenomenon caused by rising raw material prices due to the Russia-Ukraine war.

Governor Ueda stated, "The global economy is expected to go through a period of recession and then recover," adding, "The recovery from the recession will help sustain the wage growth trend in Japan."

However, regarding the monetary policy meeting scheduled for two days starting on the 27th of this month, he refrained from specific comments, saying, "Only a few days have passed since my inauguration. I will consider it gradually after returning home."

Since his inauguration on the 9th, Governor Ueda has repeatedly emphasized his intention to maintain the current financial policy to stabilize the market in official settings. Japanese media have analyzed that he is taking a cautious stance to avoid causing significant shocks to the financial market.

Nevertheless, the market predicts that since the Ueda administration faces the task of addressing the side effects caused by large-scale monetary easing policies, there will be policy revisions at least at the June monetary policy meeting.

A recent survey conducted by Nihon Keizai Shimbun targeting 75 financial institutions and foreign exchange market participants showed that half of the respondents expect a policy revision announcement between April and June. The prevailing view is that the announcement will likely be made at the June meeting, which follows the monetary policy meeting scheduled for the 27th after Governor Ueda's inauguration.

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