Speech by Deputy Governor UChida in Nara (Japan's Economy and Monetary Policy)

Headlines via Reuters:

  • BOJ won't aggressively hike rates even after ending negative rate
  • Japan's real interest rate is in deep negative territory, monetary conditions are very accommodative
  • We don't expect this to change in a big way
  • Uncertainty over outlook remain high, but likelihood of sustainably achieving our price target gradually heightening
  • We expect Japan's economic recovery to continue, positive wage-inflation cycle to strengthen
  • Consumer inflation has exceeded 2% but this is mainly due to cost-push factors
  • If sustained, sustainable achievement of price target comes into sight, role of massive stimulus will have been met and we will consider reviewing it
  • Regardless of when we tweak policy, we see need to take steps in communication, market operations to ensure there is no disruptive moves in financial markets
  • Before we introduced negative rates, BOJ applied a 0.1% interest on excess reserves, overnight call rate moved in a range of 0-0.1%
  • If we were to move back to that situation, it would be equivalent to a 0.1% interest rate hike
  • What is more important is the future short-term rate path, which will be set at appropriate level so consumer inflation moves around BOJ's 2% target
  • YCC and BOJ's bond buying management are intertwined
  • When we end or tweak YCC, we will think about how we would communicate our bond buying operation
  • Tweak to YCC would mean allowing yields to move more freely but we will ensure this does not lead to big change in our bond buying amount, sharp rise in yields
  • It would be natural to end ETF, J-REIT buying if achievement of 2% inflation can be foreseen
  • Even if we were to end ETF, J-REIT buying, impact on markets won't be big
  • What to do with our very huge ETF, J-REIT holding is a different problem, this is something we need to consider taking time
  • We will like to maintain stable, accommodative monetary environment
  • Expects service prices to rise alongside wage increases


USD/JPY has popped to new session high above 148.25 on Uchida's remarks

BoJ's Uchida
BoJ's Uchida