Research Briefing | May 1, 2023

Japan: Ueda pushes back timeline for policy adjustment

Japan: Ueda pushes back timeline for policy adjustment

The Bank of Japan (BoJ) left monetary policy unchanged at its first meeting under Governor Kazuo Ueda. Lower global yields and the BoJ’s recent measures to kerb short-selling have reduced pressure on the 10-year JGB, giving Ueda breathing room to review easing measures.

What you will learn:

  • The median CPI (excluding fresh food and energy) forecast for FY2024 and FY2025 in the Quarterly Outlook Report remained short of the 2% target at 1.7% and 1.8%, respectively. The risk assessment of the inflation forecast for FY2025 is now skewed to the downside.
  • Ueda stressed that the review is not intended to justify any specific policy changes and the bank will take necessary steps at each policy meeting even before the review is concluded. However, we believe it is more likely that the status-quo will continue in the coming quarters.
  • Although the side-effects of YCC policy still remain, the BoJ will not tweak the YCC framework as long as pressures on the yield remain contained. Together with a projected decline in global yields, the withdrawal of speculation for early policy adjustment will lessen the pressure.
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