Bank of Japan (BoJ) Governor Kazuo Ueda addressed the Japanese parliament on Friday, stating that the BoJ decided to raise rates in July due to the economy and inflation moving mostly in line with forecasts.
Key Quotes from Governor Ueda
No plans to adjust monetary easing unless economy and inflation deviate from forecasts.
Recent BoJ policy decisions considered appropriate.
Avoiding speculation by not disclosing future policy path.
Import prices rose longer than expected.
Weakened Yen could impact BoJ’s price projections.
FX movements have various impacts on the economy.
FX fluctuations may pose risks to economic forecasts.
BoJ will consider appropriate policy response to changes in forecasts due to FX movements.
FX volatility can create upside and downside risks, requiring careful analysis for policy response.
Difficult to determine when and how to disclose Japan’s estimated neutral rate.
BoJ will disclose estimated neutral rate findings if sufficiently narrowed down.
Forex influences policy based on price outlook risks.
Narrowing down expected neutral rate range while monitoring interest rate impacts on the economy.
July rate hike occurred under favorable conditions.
No current plans to sell BoJ’s ETF assets, but future sales will aim to minimize market disruption at appropriate prices.
Market Reaction
Following Governor Ueda’s comments, USD/JPY extends losses and approaches 145.50, marking a 0.44% decline for the day.
Analysis
Governor Ueda’s remarks shed light on the BoJ’s rationale for the July rate hike, emphasizing the importance of economic and inflation alignment with forecasts. The statements also highlight the potential impacts of FX movements on policy decisions and the economy, underscoring the need for careful monitoring and appropriate responses. Investors should heed these insights to better understand the BoJ’s approach and potential implications for financial markets.