The Bank of Japan’s leadership emphasized the need to nurture economic growth with stimulative policies due to a wide range of uncertainties, signaling it’s too soon for financial markets to speculate on a near-term rate hike.
Governor Kazuo Ueda and Deputy Governor Shinichi Uchida used separate appearances to drive home the message that the economic recovery and price trends are too precarious to mull a policy shift. Uncertainties around wage gains and inflation are high, and therefore the goal of achieving 2% inflation accompanied by wages gains hasn’t yet “come in sight,” Ueda told business leaders in Osaka Monday. Uchida cited “extremely high” uncertainties in making the case to stay patient at an event in Tokyo.
Ueda stressed that the economic recovery remains too fragile for a tightening of policy. Policymakers have reached an important juncture for nurturing “the buds of change in the economy, he said. Authorities “will pay close attention to whether moves to increase wages will continue, and whether the underpinning of private consumption from the income side will strengthen.”
The widening interest gap between the US and Japan has dragged the yen lower since the Fed began its monetary tightening campaign. Regarding global inflation trends, price increases “are still somewhat high relative to the central bank targets,” Ueda said.
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