Japan Suzuki: Not at a stage where Japan can avoid the risk of falling back into deflation
Japanese Finance Minister Shunichi Suzuki said on Tuesday that the central bank have not reached a stage where Japan can avoid the risk of falling back into deflation.
Key quotes
“Positive development is seen in Japan's economy such as high pay hikes, record capex.”
“We have not reached a stage where Japan can avoid the risk of falling back into deflation.”
“As such we cannot declare deflation as beaten.”
“Cannot comment on market moves such as forex, stock prices.”
”Declines to comment on interest rate outlook after ending negative rates.”
Market reaction
At the time of writing, USD/JPY is trading 0.08% lower on the day at 146.83.
Bank of Japan FAQs
What is the Bank of Japan?
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
What has been the Bank of Japan’s policy?
The Bank of Japan has embarked in an ultra-loose monetary policy since 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds.
How do Bank of Japan’s decisions influence the Japanese Yen?
The Bank’s massive stimulus has caused the Yen to depreciate against its main currency peers. This process has exacerbated more recently due to an increasing policy divergence between the Bank of Japan and other main central banks, which have opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy of holding down rates has led to a widening differential with other currencies, dragging down the value of the Yen.
Is the Bank of Japan’s ultra-loose policy likely to change soon?
A weaker Yen and the spike in global energy prices have led to an increase in Japanese inflation, which has exceeded the BoJ’s 2% target. Still, the Bank judges that the sustainable and stable achievement of the 2% target has not yet come in sight, so any sudden change in the current policy looks unlikely.
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