BoJ holds steady assessment for 7 of Japan's 9 regions
The Bank of Japan (BoJ) Regional Economic Report, known as the Sakura report, maintains an unchanged economic assessment for 7 of 9 regions across Japan. Many regions said firms were passing on rising costs from the Middle East conflict, the weak Japanese Yen (JPY) as well as distribution and labor costs.
Key quotes
Many regions said firms continue to offer high wages.
Some regions said firms struggling to pass on costs could curb wage increases.
Many regions said firms were passing on rising costs from Middle East conflict, weak yen as well as distribution and labour costs.
Some regions said some firms in their areas were raising prices more frequently than in the past.
Many regions said firms were increasing output due to robust global AI-related demand.
Many regions said corporate investment appetite remains strong.
Many regions said consumption remained resilient despite bad weather.
Market reaction
At the time of writing, USD/JPY is up 0.06% on the day at 158.18.
Bank of Japan FAQs
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%.
The Bank of Japan embarked in an ultra-loose monetary policy in 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. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.
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