BoJ’s Uchida: Future rate path depends on economic, price developments at the time
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Bank of Japan (BoJ) Deputy Governor Shinichi Uchida stated that the future rate path of the BoJ depends on economic and price developments at the time. The focus will be on the pace of increase in inflation expectations and the degree of price dynamism, including wages. The BoJ will determine whether conditions have fallen into place to shift policy and then consider the most appropriate means and sequence to do so. Uchida emphasized that terminating Yield Curve Control (YCC) does not mean the BoJ will suddenly stop bond buying. The decision to expand or scale back the balance sheet will depend on economic developments at the time. Uchida also mentioned that rising prices leading to higher wage growth and the outcome of this year's annual wage negotiation will be crucial factors in judging whether a positive economic cycle will kick off. The likelihood of sustained achievement of the 2% inflation target is gradually heightening. Uchida did not comment on market perceptions of the future rate path. The fate of the BoJ's overshooting commitment will be decided once sustained achievement of the 2% inflation target comes into sight. The government and the BoJ share a common understanding in guiding policy, and wage growth is essential for sustainable 2% inflation. At the time of writing, USD/JPY is trading at 148.64, up 0.30% on the day.
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