Bank of Japan Governor Kazuo Ueda told the House of Councilors Committee on Finance and Finance on the 9th that if the underlying inflation rate gradually increases as expected by the Bank of Japan, “we will have to consider reducing the degree of easing.” Stated. The photo shows President Ueda giving a press conference. Photographed at the Bank of Japan head office in March. (2024 Reuters/Kim Kyung-Hoon/File Photo)
TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda told the House of Councilors Committee on Fiscal Policy and Financial Affairs on the 9th that if the underlying price increase rate gradually increases as expected by the Bank of Japan, the Bank of Japan will “reduce the degree of monetary easing.” I have to think about it,” he said. However, whether this will actually happen will depend on future data, and the Bank will carefully examine developments in economic and price conditions at each monetary policy meeting. At this point, he said, “I have no preconceptions” about when and how short-term interest rates will be moved.
He gave an overview of the “Report on Currency and Financial Adjustments” (semi-annual report) and answered questions from each committee member.
The semi-annual report stated that the underlying rate of increase in consumer prices would gradually increase toward the 2% price target towards the end of the outlook period. In a question and answer session, Governor Ueda stated that the underlying inflation rate is “still slightly below 2%,” and pointed out the importance of maintaining an accommodative financial environment.
Real interest rates will remain significantly negative even after the policy change in March, he said, adding, “Such an accommodative financial environment will firmly support the economy and prices, including the business environment for small and medium-sized enterprises.”
Governor Ueda stated that the government will continue to check whether wages will actually increase based on the results of the spring labor union, and whether rising wages will be reflected in service prices. On the other hand, he also pointed out that “the risk that the inflation rate will fall significantly below the Bank of Japan’s forecast is becoming much lower.”
While acknowledging that wage increases for small and medium-sized enterprises “will be difficult depending on the industry and individual company,” he explained, “Overall, we believe that wage increases will increase to some extent in the future.”
He also said that given the current economic outlook, a short-term interest rate of 0-0.1% would be appropriate for the time being.
<“Nothing definite can be said” regarding the timing of reduction in government bond purchases>
At its monetary policy meeting in March, the Bank of Japan decided to revise its large-scale easing policy, including lifting negative interest rates. The Bank of Japan decided to abolish the three-tier structure of current account deposits and start paying an additional 0.1% interest on excess reserves.
Governor Ueda explained that the interest charged on current deposits is not for the purpose of creating subsidies for financial institutions, but for the purpose of realizing the policy interest rate guidance target in the short-term market. He said that the impact on financial institutions’ management due to the lifting of negative interest rates would be “generally limited.”
The Bank of Japan points out that the outstanding amount of government bonds held by the Bank of Japan will remain largely unchanged for the time being. Although the company expects to reduce it in the future, “At this point, I cannot say anything definitive about when or by how much.”
Regarding exchange-traded funds (ETFs), he said he is not thinking of disposing of them immediately, saying, “I would like to take some time to consider whether or not to dispose of them, and what method I will take if I do.”
He also explained that even if the Bank of Japan’s finances deteriorate temporarily because the Bank of Japan’s payments exceed the interest it receives due to the additional interest rate hike, it will not affect policy management.
Regarding the average remaining interest rate of government bonds held, he also pointed out, “There is no specific target to aim for.”
In the foreign exchange market, the yen is depreciating. Governor Ueda declined to comment specifically on exchange rate movements or levels, but he acknowledged that it is important for exchange rates to move stably in line with fundamentals. “Monetary policy is not operated to control exchange rates,” he said, speaking generally, “If movements in exchange rates reach a situation where they have a non-negligible impact on economic and price conditions, monetary policy is not carried out to control exchange rates.” Of course, there is a possibility that we will consider ways to respond.”
The governor also pointed out that “the Bank of Japan has stopped its policy of expanding the monetary base,” which it has continued to do while promoting quantitative easing. He explained that the “overshoot-type commitment” to continue monetary easing until prices rise to a certain level above 2% has come to a halt.
(Takahiko Wada, Kentaro Sugiyama, Fumi Takemoto; Edited by Shiho Tanaka)
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2024-04-09 06:31:13
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