Bank of Japan Board Member, Tamura Naoki at a meeting with local leaders in Nagano
- Worried that sharp rises in rice prices, coupled with inflation exceeding 2% lasting for nearly three years, could hurt consumption.
- Output gap may already effectively be in positive territory as supply constraints put upward pressure on prices.
- Corporate and household inflation expectations are heightening, having roughly reached levels around 2%.
- Upward price risks are building up.
- The BOJ must raise rates to levels deemed neutral on a nominal basis, which is at least around 1%.
- The BOJ must raise rates at least to around 1% in the latter half of fiscal 2025.
- The BOJ must raise rates in several stages in a timely fashion while scrutinising what the appropriate short-term rate level could be for the economy.
- Even if BOJ hikes rates to 0.75%, real interest rates will remain deeply negative.
- Personally don’t think we can say BOJ’s past massive monetary easing had a positive effect as a whole given strong side-effects.
- Must scrutinise whether prolonged monetary easing could cause problems such as excessive yen falls and housing price spikes.
more to come
The yen is gaining ground on all this.
This article was written by Eamonn Sheridan at www.forexlive.com.
