Easy financial conditions will be maintained for the time being

Speaking at the post-policy meeting press conference on Friday, Bank of Japan (BoJ) Governor Kazuo Ueda said that the Bank “will adjust the degree of monetary easing if underlying inflation rate rises,” adding that “easy financial conditions will be maintained for the time being.”

The BoJ kept the interest rate on hold at 0% following the April meeting.

Additional quotes

Japan’s economy has recovered moderately, although some weakness has been seen.

Must pay due attention to financial, FX market moves, impact on Japan’s economy, prices.

Monetary policy conduct depends on future economic, price, financial conditions.

Economic outlook, risk overshoot may also be a reason for policy change.

Monetary policy is not aimed to control FX rates directly.

If FX fluctuations affect underlying inflation, that could be a consideration for monetary policy.

Although main reason for FY2024 inflation outlook upgrade is higher crude price, weak Yen had impact to some extent.

Likelihood of achieving 2% inflation target is gradually rising.

Reduction of JGB buying in future is in sight.

Not want to use reduction of JGB buying as a proactive monetary policy tool.

Will carry out appropriate short-term rate adjustment, taking effect of BoJ’s JGB holding on long-term yield into consideration.

FX’s impact on inflation rates is usually tentative.

Chance of prolonged weak Yen is not zero.

We can preemptively judge if weak Yen affects underlying inflation, spring wage talks next year.

No change to JGB buying amount from March.

Future reduction of JGB buying will be decided at policy board.\

Achievement of 2% inflation target is ‘extremely close’ if our FY25, 26 inflation forecasts materialise.

When our inflation outlook materialises, that’s almost in the state of neutral rate of interest.

Will evaluate future underlying inflation based on service prices, weak yen-induced import price hikes, corporate wage, price-setting behavior.

There was no opposition to maintaining 6 trln yen JGB purchases at today’s meeting.

Market reaction

USD/JPY rises back to test 156.00 following these comments. The pair was last seen 0.25% higher on the day at 156.03.