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Bank of Japan (BoJ) board member Asahi Noguchi said on Thursday that the Japanese economy is growing steadily. Noguchi further stated that the central bank is likely to keep adjusting the policy rate, while carefully assessing whether underlying inflation would be stabilising around 2%.
Key quotes
Japan’s economy is growing steadily.
Japan’s economy is currently shifting to a new phase where sustainable inflation is realized, accompanied by wage increases.
Downside risks to the Japanese economy stemming from overseas economies have rapidly heightened due to U.S. tariff policies.
BOJ is likely to keep adjusting the policy rate while carefully examining whether underlying inflation would be stabilising around 2%.
BOJ shouldn’t pre-set the terminal rate in raising rates.
BOJ should spend time gauging impact of each rate hike on economy, scrutinise risks, before moving to next hike.
10-year JGB yield rose near 1.6% in March but I didn’t see it as disruptive as it reflected change in market’s view on terminal rate.
Personally don’t see the need to make big changes to the existing BOJ taper plan.
As for the taper plan for April 2026 onward, we need to examine it with a longer-term perspective.
BOJ can spend sufficient time reducing its balance sheet, doing so is desirable for market stability.
BOJ is maintaining loose monetary policy as rise in inflation is mainly driven by import costs, not necessarily sustainable.
Monetary policy must focus on underlying price moves that are strongly linked to nominal wage developments.
Wage, domestic demand-driven price pressure is not strong enough but steadily increasing.
Our basic monetary policy stance should be to cautiously move on policy adjustment while scrutinising the economy and its risks.
Market reaction
The USD/JPY pair is down 0.25% on the day to trade at 143.30 as of writing.
