BOJ: chances of meeting price goals are “gradually” rising
As widely expected, the Bank of Japan left its short-term rate and bond yield targets unchanged. It however cut its FY 2024 core consumer inflation forecast to 2.4%.
During his press conference, BOJ Governor Kazuo Ueda said “the prospects of seeing trend inflation hitting 2% are gradually heightening”. IG Angela Barnes has more.
(AI Video Summary)
The Bank of Japan
The Bank of Japan (BOJ) has decided to keep its super easy monetary policy in place, meaning it will continue with its strategy of negative interest rates and controlling bond yields. However, there are signs that the conditions for scaling back this massive stimulus program are slowly starting to come together. In its latest report, the BOJ mentioned that consumer inflation is expected to gradually increase towards the bank's goal. This is based on factors like the difference between actual and potential economic growth, as well as rising expectations for future inflation and wage growth.
Japanese inflation
Despite these positive expectations, the BOJ has lowered its forecast for consumer inflation in the upcoming fiscal year. They now expect inflation to be 2.4% instead of the previously estimated 2.8%. On the other hand, the bank slightly raised its inflation forecast for 2025. This decision to maintain ultra-easy monetary settings shows that the BOJ still believes more stimulus is needed to support the country's economic recovery. They have been implementing policies like negative interest rates to counter deflation and boost inflation.
Raising interest rates
However, with some improvements in inflation and growth, the BOJ's report suggests that they may start to phase out these stimulus measures. This could happen by gradually raising interest rates and buying fewer assets. Although there is no specific timeline for these actions, the fact that the BOJ has acknowledged positive developments in inflation and growth is a sign that their policy stance may change in the future.
In summary, the Bank of Japan has decided to keep its super easy monetary policy in place, but they are starting to consider scaling back their stimulus program. They are seeing some positive signs in inflation and growth, although their forecast for consumer inflation has been lowered for the upcoming fiscal year. This could lead to a shift in their policy stance in the future, which may involve raising interest rates and reducing asset purchases.
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