BOJ must patiently maintain monetary easing under YCC

Bank of Japan (BoJ) published the Summary of Opinions from its January monetary policy meeting on January 22 and 23, with the key findings noted below.

Key quotes

“One member said BOJ must patiently maintain monetary easing under YCC.”

“One member said positive wage-inflation spiral must strengthen further, wage growth must clearly exceed 2%, for japan to achieve BOJ’s 2% target.”

“One member said prerequisite for policy change, including ending negative rate, appears to be falling into place given improvements in economy, prices.”

“One member said we are now at the phase where we confirm through specific economic data likelihood of achieving 2% inflation target.”

“One member said there is strong chance we can judge that policy normalisation is possible, once we confirm impact of quake on economy in coming 1-2 months.”

“One member said we must deepen debate on exit as likelihood of achieving our price target has heightened.”

“One member said hard to pre-set interest rate path after ending negative rates.”

“One member said in what sequence BOJ could change policy would depend on economic, price conditions at the time but basically steps with big side-effects should first be modified.”

“One member said it is natural to end BOJ’s ETF, REIT purchases if sustained, stable achievement of 2% price goal comes into sight.”

“One member said BOJ should end negative rate at appropriate timing to ensure path toward policy normalisation becomes a gradual one.”

“One member said BOJ could be forced to sharply tighten monetary policy if its decision to end negative rate comes too late.”

Market reaction

The USD/JPY pair attracts some seller following the BoJ’s Summary of Opinions, losing 0.26% on the day to trade at 147.26, as of writing.