TOKYO (Reuters) – Japan’s new governor Kazuo Ueda will decide on Thursday whether wage growth will sustain enough to keep the Bank of Japan’s inflation target of 2% stable. He said he wanted more time. that great stimulus.
Ueda said the outlook for sustained increases in inflation and wages, a prerequisite for phasing out his predecessor’s controversial monetary stimulus, was clouded by slowing global growth. , facing a bumpy road.
“Given current economic, price and financial developments, it is appropriate to maintain control of the yield curve for the time being,” Ueda said at a news conference on Monday.
Monetary policy may need to be normalized if the BOJ decides it can hit its price target, he said. If not, we may need to consider the side effects of monetary easing and come up with a more sustainable framework. “
The 71-year-old scholar’s term began on Sunday, succeeding Haruhiko Kuroda, whose second five-year term ended Saturday.
The BOJ could soon phase out Yield Curve Control (YCC), a policy that limits 10-year government bond yields to near zero, as criticism mounts that it distorts markets and hurts bank margins. There is a lot of speculation about it being sexual.
At a parliamentary confirmation hearing in February, Ueda said ultra-accommodative policies needed to be maintained to enable Japan to sustainably meet the Bank of Japan’s 2% inflation target, supported by rising wages. He emphasized that there is
However, with inflation above target, many analysts expect the Bank of Japan to set its short-term interest rate target at 0.1% and cap the 10-year JGB yield at 0%. I expect it to be adjusted or terminated.
In Japan, long-stagnate inflation and wage growth are starting to show signs of recovery. After reaching his 41-year high of 4.2% in January, the core consumer price index remains above his 3% as more companies raise prices in response to rising raw material costs. .
To compensate for the rising cost of living for households, major companies are proposing wage increases of around 4% at this year’s annual labor consultations, the fastest pace in almost 30 years.
“We welcome the outcome of this year’s spring wage negotiations, but we need to scrutinize whether this move will continue,” Ueda said.
Growing fears of a US recession are creating headwinds for Japan’s export-dependent economy. While the end of COVID-19 restrictions is supporting spending, some analysts warn that recent price hikes on essentials could hurt spending.
Ueda will chair the first policy meeting on April 27-28, when the Board will release new quarterly growth and price forecasts through fiscal 2025.
Markets will be watching to see if the Board expects inflation to accelerate towards or reach 2% in 2024 and 2025.
In its current forecast, the Bank of Japan expects core consumer inflation to reach 1.6% in the fiscal year starting this month and accelerate to 1.8% next year.
Ueda served on the board of the Bank of Japan from 1998 to 2005, during which time the central bank introduced zero interest rates and quantitative easing to combat deflation and economic stagnation.
Reported by Reika Kihara and Tetsushi Kajimoto. Additional report by Yoshifumi Takemoto.Edited by Sam Holmes, Toby Chopra and Hugh Lawson
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