Tuesday, June 6, 2023
HomeEconomyBOJ's forecast must be very strong to consider adjusting YCC-Gov Ueda

BOJ's forecast must be very strong to consider adjusting YCC-Gov Ueda

By Leika Kihara

TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda said on Monday the central bank’s inflation forecast for the year ahead must be “very strong, close to 2%” Consider tweaking yield curve control.

“Currently, trend inflation is below 2 percent, so we must maintain monetary accommodation,” Ueda told parliament. “But when trend inflation is expected to reach 2 percent, the BOJ must normalize monetary policy,” he added.

Ueda’s comments came ahead of the Bank of Japan’s two-day policy meeting starting Thursday, when the board will issue new quarterly growth and inflation forecasts.

The Bank of Japan is likely to maintain its ultra-loose monetary policy in its first interest rate review chaired by Ueda, sources told Reuters, citing an April post.

Japan’s inflation may peak soon and ease back to the BOJ’s 2% target in the second half of the year, although companies are more than expected to pass on rising import costs to consumers Following he said the current fiscal year ended March 2024.

“BoJ forecasts for half-year, one-year and one-and-a-half year trend inflation” must be very strong ahead, close to 2%. We also need to judge that there is a high probability that the forecast will come true,” Ueda said when asked by opposition lawmakers to clarify the conditions for adjusting yield curve control.

Under yield curve control (YCC), Japan The central bank guides short-term interest rates to -0.1% and 10-year bond yields near zero, with an implied cap of 0.5%.

Ueda declined to specify Explaining how the Bank of Japan might phase out YCC, saying it will depend on the economy at the time, the pace of inflation and many other factors.

“At the moment, I cannot say how this will be done,” Ueda Referring to the BOJ’s exit strategy, he said. – Loose policy, when the right time comes.

Financial,” he said.

How to unload the massive stock of exchange-traded funds (ETFs) the BOJ has amassed through massive asset purchases to drive up inflation will be one of the main challenges facing the bank, Ueda said, as it considers ending the super debate on loose monetary policy.



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