Bank of Japan deputy governor Uchida:
- US tariffs put downward pressure on Japan’s economy
- There are both upside, downside risks from US tariffs on Japan’s prices
- Japan’s economic growth to slow to around potential before accelerating again as overseas growth resumes moderate growth path
- Japan’s output gap to remain around current levels, after which it will resume improvement toward end of BOJ’s 3-year projection period through fiscal 2027
It sounds like Uchida is uncertain of where to go with policy from here? At least in the near to medium term.
Ahh, here is some more, a little more confident on hikes now?
- BOJ expected to keep raising interest rates if economy, prices improve as we project
- Japan’s underlying inflation, medium- and long-term inflation expectations will likely stagnate temporarily
- But even during that period, wages are expected to continue rising as Japan’s job market very tight, firms likely to continue passing on rising labour costs
- Once global economy resumes uptrend, Japan’s economy likely to recover and heighten underlying inflation, inflation expectations
- Uncertainty surrounding our forecasts is extremely high, so we will determine without pre-conception whether our forecasts will materialise
- Strong yen has negative impact on exports, big manufacturers’ profits but improves households’ real income and pushes up retailers’ profits via falling import costs
- Rapid FX moves make it difficult for firms to set business plans, heighten uncertainty
–
Meanwhile, USD/JPY has dribbled lower since Kato’s verbal intervention efforts a little while ago:
This article was written by Eamonn Sheridan at www.forexlive.com.
