Bank of Japan (BoJ) Governor Kazuo speaks at a press conference on Tuesday, explaining the Bank’s decision to hold the interest rate at 0.5% for the third straight meeting.
Additional quotes
Showed JGB buying plans through March 2027 to allow flexibility, predictability.
Will respond nimbly in case of rapid rise in long-term interest rates such as by increasing bond buying, conducting fixed-rate bond purchase operations, using fund-supply operations against pooled collateral.
Japan’s economy is recovering moderately, although some weak moves are seen.
Easy monetary conditions will support economy.
Japan’s economic growth likely to moderate as trade policies lead to slowdown in overseas economy, decline in corporate profits.
Expect Japanese economic growth rate to rise thereafter as overseas economies returning to moderate growth path.
Developments on trade policies and how overseas economy, price react to them are extremely uncertain.
Must pay attention to trade policies’ impact on financial, FX markets, Japan’s economy and prices.
Will keep raising rates if economy, prices improve.
Important to judge whether outlook will be achieved without any preconception.
Will guide policy from standpoint of sustainably, stably achieving price target.
No big change to overall picture of japan’s economy, prices from last mpm.
Potential upside, downside risks to prices.
Need to be aware of secondary effect on underlying inflation from cost-push factors.
Judged that downside risks are bigger for both economy, prices.
Too quick tapering bond could make unexpected effects in market.
Made decidion on bond tapering based on market participants’ opinion.
Aware that rising food prices having impact on households.
Mindful that rising prices have impact on inflation expectations.
Will continue to carefully monitor data in deciding policy.
Hard economic data globally showing relative firmness.
Decision on bond tapering not so much about fiscal considerations but about avoiding excessive volatility negatively impacting economy.
There are more pessimistic data on sentiments globally.
There are still some solidness shown in hard data.
Growing view that pessimistic data would come out latter half of 2025.
Further rate hike would depend on likelihood of achieving our outlook.
Bond tapering is preventative measure against uncertainties in bond market.
Decision on bond tapering based on market movements in April-May.
developing story ….
Market reaction
USD/JPY remains offered following these comments. The pair was last seen trading 0.08% lower on the day near 144.60.
Central banks FAQs
Central Banks have a key mandate which is making sure that there is price stability in a country or region. Economies are constantly facing inflation or deflation when prices for certain goods and services are fluctuating. Constant rising prices for the same goods means inflation, constant lowered prices for the same goods means deflation. It is the task of the central bank to keep the demand in line by tweaking its policy rate. For the biggest central banks like the US Federal Reserve (Fed), the European Central Bank (ECB) or the Bank of England (BoE), the mandate is to keep inflation close to 2%.
A central bank has one important tool at its disposal to get inflation higher or lower, and that is by tweaking its benchmark policy rate, commonly known as interest rate. On pre-communicated moments, the central bank will issue a statement with its policy rate and provide additional reasoning on why it is either remaining or changing (cutting or hiking) it. Local banks will adjust their savings and lending rates accordingly, which in turn will make it either harder or easier for people to earn on their savings or for companies to take out loans and make investments in their businesses. When the central bank hikes interest rates substantially, this is called monetary tightening. When it is cutting its benchmark rate, it is called monetary easing.
A central bank is often politically independent. Members of the central bank policy board are passing through a series of panels and hearings before being appointed to a policy board seat. Each member in that board often has a certain conviction on how the central bank should control inflation and the subsequent monetary policy. Members that want a very loose monetary policy, with low rates and cheap lending, to boost the economy substantially while being content to see inflation slightly above 2%, are called ‘doves’. Members that rather want to see higher rates to reward savings and want to keep a lit on inflation at all time are called ‘hawks’ and will not rest until inflation is at or just below 2%.
Normally, there is a chairman or president who leads each meeting, needs to create a consensus between the hawks or doves and has his or her final say when it would come down to a vote split to avoid a 50-50 tie on whether the current policy should be adjusted. The chairman will deliver speeches which often can be followed live, where the current monetary stance and outlook is being communicated. A central bank will try to push forward its monetary policy without triggering violent swings in rates, equities, or its currency. All members of the central bank will channel their stance toward the markets in advance of a policy meeting event. A few days before a policy meeting takes place until the new policy has been communicated, members are forbidden to talk publicly. This is called the blackout period.
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