- Need to pay attention to whether inflation triggered by yen depreciation may raise inflation expectations
- The risk there is that it may also raise underlying inflation
- BOJ will continue to raise policy rate in response to economic, price, financial developments
- Japan has clearly entered into inflationary phase
- What is vital now is to ensure that underlying inflation does not exceed 2%, managed by appropriate policy setting
- Judged that the situation did not warrant a hasty decision to raise interest rates during April meeting
- Surge in fuel prices may turn out to be a temporary shock
- What is of concern is that it could further accelerate Japan’s already mounting distribution costs
- Higher distribution costs could contribute to food price hikes, resulting in the shock being more enduring
- Impact of the energy shock from the war on Japan’s economy could be more serious than in the 1970s
- That is a risk that warrants attention
There’s definitely some hawkish elements in there, with Masu also pressing the issue in saying that “negative real rates should be addressed as soon as possible” given that he views Japan to be no longer in a deflationary cycle. But when push comes to shove, he defended their decision to not move in April in saying that further consideration is needed in raising interest rates when they are close to the neutral level. Ugh.
It is quite a typical response from BOJ policymakers from time to time. They will go as far as trying to convey the message that they are ready to do what it takes to hike rates again next. However, they will then step back in committing or pre-committing to anything while reaffirming that it is also prudent to be patient.
That was the same kind of thing that led to the rushed rate hike in December last year, when they had ample opportunity to deliver one in the months before.