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BOJ's Tamura warns of inflation overshoot, wages key to exit timing

Leika Kihara and Takahiko Wada

TOKYO, Japan/Maebashi (Reuters) – Bank of Japan (BOJ) board member Naoki Tamura warned on Wednesday that inflation would Likely to overshoot, saying the timing of ending ultra-loose monetary policy will depend on future economic, price and wage developments.

He also said the central bank would weigh the pros and cons of its current policy framework before deciding whether to take additional steps at its next meeting in March in response to market violations of its 25 When there is an upper limit on the yield of one-year bonds.

“It is true that the deterioration in the functioning of the bond market has not been resolved at the moment,” Tamura, a former commercial banker, told a news conference in Maebashi, Japan.

“We will take into account economic factors,” he added, “price and wage developments at the time” determine the timing of monetary policy normalization. n would prompt the Bank of Japan to end its yield curve control (YCC) policy and start raising interest rates when the term of dovish incumbent Governor Haruhiko Kuroda ends in April.

Kazuo Ueda, a government-nominated academic to succeed Haruhiko Kuroda, will be scheduled for the week Itsuwa speaks in parliament next Monday, giving markets an early glimpse of his views on how soon the BoJ can phase out YCC.

In a speech earlier in the day, Tamura reiterated his view, That is, the BOJ must at some point conduct a full review of its monetary policy framework by weighing the costs and benefits of the current ultra-loose policy.

While emphasizing the need to maintain accommodative policy for now, Tamura said, as prices for services Inflation is likely to exceed initial forecasts due to rising raw material costs and as more companies pass on rising raw material costs to households.

He also said a prolonged period of ultra-low interest rates could hamper innovation and prevent Japan from The productivity of y increased from the increase.

Under YCC, the BOJ guides short-term interest rates to -0.1% and 25 year bond yields to around zero, As part of efforts to sustainably meet its 2% inflation target.

Faced with rising global interest rates, the Bank of Japan was forced to raise its 25 yr Implied cap target for yield raised to 0.5% from 0.25% – a move that stoked expectations for a near-term adjustment in the YCC.

With 10 year bond yields breaching the 0.5% ceiling, the central bank said on Wednesday that it would conduct emergency bond purchases to ward off a fresh round of market attacks on YCC.

“At this stage, it is important to pay careful and humble attention to how the market will stabilize and to what extent the market function will improve,” Tamura said in his speech.



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