• Japan’s economy is recovering moderately
  • No need to ease preemptively if economic impact of sales tax hike is temporary
  • BOJ took all possible steps in April, now its time to monitor policy effects
  • BOJ has broken away from incremental approach since deploying QE in April
  • Small diversions of economic, price outlook will not trigger further BOJ action
  • Downside risks that may trigger easing refer to Lehman-scale tail risk
  • BOJ’s current QE is not kind of policy that can be continued for ever
  • Do not expect sales tax hike to cause severe economic downturn
  • Hard to project inflation to continue sharply exceeding 1%
  • BOJ price target should be regarded as flexible concept with certain range for deviations
  • High uncertainty exists on whether short-term price rises will affect long-term inflation expectations
  • Global economy gradually improving but risks include fate of US debt problem, potential market instability surrounding Fed tapering

Sato’s full speech is here: Recent Economic and Financial Developments, and Monetary Policy (PDF)

There has been much market speculation recently of further easing from the BOJ, and such talk has accounted for much of the run up in the yen crosses and the Nikkei. Sato seems to be trying to water down expectations.