Bank of Japan’s Kazuo Ueda Signals No Policy Change Despite High Inflation

Kazuo Ueda, governor of the Bank of Japan (central bank), said on Thursday (25th) that although inflation at record highs is restraining the economy, a sudden change to the long-standing ultra-loose monetary policy will have consequences, and it seems that there is no intention to change the current policy.

Ueda accepted his first joint visit since taking office in April at the Bank of Japan headquarters. He told reporters that the Bank of Japan has not yet achieved the stable and sustainable goal of a 2% price growth target, and the core inflation rate is still gradually rising.

Japan’s consumer price index (CPI), which excludes fresh food and energy, rose at an annual rate of 4.1% in April, the largest increase since 1981, indicating that Japanese consumers, accustomed to years of deflation, are now feeling the pressure of rising prices .

“It’s clear to me that inflation has become a burden. But energy price increases are starting to fade, and there will be slower growth going forward,” Ueda said.

In view of this, the Bank of Japan is reluctant to adjust the monetary easing policy in a hurry. “Monetary tightening will have a cumulative effect on top of falling prices, with serious negative effects on employment and other areas,” Ueda said.

Ueda emphasized that the 2% price stability target should not be adjusted easily and will continue to push the Bank of Japan towards this target.

When the Bank of Japan may stand still, many officials of the US Federal Reserve (Fed) made hawkish speeches, raising the probability of raising interest rates by 1 yard (25 basis points) in June and July, and the interest rate gap between the United States and Japan further widened, resulting inJPYThe selling pressure was heavy.

JPYIt fell as much as 0.5% to 140.23 on Thursday JPYAgainst the US dollar, it broke through the 140 mark for the first time since November last year.JPYIt has depreciated against the dollar by 13% from its January high JPYagainstEUR、GBPOther major currencies are also weak.

Jefferies currency strategist Brad Bechtel said,JPYBig change against the dollar, maybe next weekJPY143 broken.

Adjust YCC?

Among the easing policies of the Bank of Japan, the “Yield Rate Curve Control” (YCC) policy, which plays the most critical role, observers are looking for clues of when Ueda may relax YCC.Under current policy, the Bank of Japan 10-Year Treasury Bond YieldThe interval is controlled at ±0.5%.

Ueda said that regarding the continuation or adjustment of the YCC policy, if the balance of benefits and side effects changes, there may be adjustments.

The Bank of Japan announced at its April meeting that it will conduct a broad review of policies over the past 20 years. Ueda said the review is estimated to take 12 to 18 months, and that policy adjustments may be made during this period if necessary.