BoJ’s Nakamura: Economic uncertainty heightening, so cautious policy approach necessary

Bank of Japan (BoJ) board member Toyoaki Nakamura said on Friday that “uncertainty over economic outlook heightening, so cautious monetary policy approach is necessary.”

• Additional quotes
• US trade policy, overseas economies, FX do affect Japan’s economy, prices so must be taken into account in setting monetary policy.
• But medium- long-term perspective on Japan’s fundamentals also need to be taken into account in setting policy.
• Risk of Japan facing negative wage-inflation spiral not big.
• Rising food prices could affect underlying inflation so must be vigilant.
• Hurdle for narrowing wage divergence between big, small firms still high.
• Downward pressure on Japan’s economy heightening due to slowing global growth, worsening earnings at mainstay automobile sector.
• Companies increasingly putting off, taking wait-and-see stance on capex plans due to us tariff uncertainty.
• If delays in capex broaden, that could prod firms to shift supply chains overseas to cope with supply constraints.
• Japan is at critical phase of pulling completely out of deflation.
• Appropriate to keep monetary policy steady for time being.
• Hiking rates prematurely when growth is slowing could curb consumption, capex.
• Japan's economy has recovered moderately but some weakness has been seen.
• Economy facing mounting downward pressure due to implementation of US tariff policies.
• Greater uncertainties from US tariff policies which could pose serious challenges for Japan.
• Closely monitoring future developments for firms to see whether they will shift their stance back in direction of contracting their businesses by cutting costs.
• Seeing polarisation in wage stance among big, smaller firms.
• Momentum for wage hikes has accelerated but could weaken depending on impact of US tariff policies.
• Private consumption has lacked momentum due to price rises and households' thriftiness.
• Economic growth is likely to be moderate.
• Accommodative financial conditions are seen providing support.
• Extremely uncertain how trade and other policies in each jurisdiction will unfold and how overseas economic activity and prices will react to these policies.
• Need to pay attention to fact that uncertainty is high for outlook of overseas economy, prices affected by various trade policies.

Market reaction

At the press time, USD/JPY is trading -0.21% on the day near 145.40.