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BOJ Andari says adjustment to ultra-loose policy too early

By Leika Kihara

KAGOSHIMA, Japan (Reuters) – Bank of Japan board member Seiji Adachi said it would not be possible to start a rate review next month given the rate drop. The chances of adjusting the bank’s yield curve control policy are slim. Market distortions and lack of price trend data.

He also said that the central bank will not use monetary policy as a tool to prevent the yen from falling, ruling out the possibility of Japan changing the yen exchange rate in the short term. Ultra-low interest rates.

“The shape of the yield curve is quite smooth, and the Japanese government bond (JGB) yield is acting as a benchmark rate for the corporate bond market,” Adachi told reporters after meeting business leaders in Kagoshima, southern Japan .

“If market conditions don’t change much from here, it’s possible we could adjust yield curve control in July to stem any distortion in the yield curve,” he said.

This was the strongest comment yet from a BOJ policymaker, ruling out a change in policy at the next meeting scheduled for July 10-.

The BOJ is widely expected to raise its price forecast on a quarterly basis as inflation has remained above its 2% target for more than a year

This has led some market participants to bet that the BOJ may adjust the YCC at its July meeting to address market distortions caused by its tough defense of the 0% cap. 10 Annual Returns rate.

Adachi said the BOJ will have to look at consumer price data from July onwards to see if inflation is above its baseline scenario. July data will have to wait until the BOJ’s July 10-28 meeting until after the meeting.

“Personally, I find it hard to see just inflation data through June,” he said , making a strong call on whether price trends in Japan are beyond our baseline scenario.

“Consequently, it is difficult to say that the assumption that we can change policy in July is that inflation is beyond our forecast or is on track to stabilize towards our target.”

considered yes Adachi, one of the few aggressive easing advocates on the BOJ’s board, said the outlook for prices is at risk With the global economic outlook weakening, our inflation level is skewed to the downside in the long run.

“In a sense, we are getting closer to achieving our price target. But there is a high degree of uncertainty about our baseline inflation outlook, so it is too early to adjust monetary policy,” He said in a speech to Kagoshima business leaders.

Behind the curve

Adachi’s dovish comments echoed those of Governor Kazuo Ueda, who emphasized the need to keep monetary policy ultra-loose until more Evidence suggests wages will continue to rise next year, helping Japan sustainably meet its 2 percent inflation target.

But not in all nine countries – board members seem to agree.

Minutes of the bank’s April meeting showed some board members warned of side effects of the policy and the risk of raising rates too late, stressing concerns about how quickly the BOJ should follow its global peers in phasing out stimulus. There are divisions within the group.

In Ueda’s first interest rate review in April, one member said the BOJ must ensure its policy “does not fall behind the curve” as wages and inflation There are already signs of acceleration.

Another member said the BOJ must avoid a situation where it would have to change interest rates abruptly because it would be hugely damaging to businesses accustomed to very low rates interference.

“The BOJ must monitor price and wage developments with humility, and not react too quickly, but not too slowly,” said a second member.



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