Bank of Japan Governor Ueda in Nagoya to deliver a speech and take questions from business executives.
In summary:
Economic Activity:
Corporate Sector: Business sentiment has improved, with corporate profits on an upward trend. Firms maintain active investment stances, focusing on future growth areas such as digitalization and decarbonization.
Household Sector: Private consumption shows a moderate increasing trend, supported by clear rises in nominal wages and summer bonuses.
Overall Outlook: A virtuous cycle of rising income leading to higher spending is gradually intensifying, with real GDP projected to grow around 1% in the coming fiscal years.
Price Developments:
Current Inflation: The year-on-year increase in the Consumer Price Index (CPI) for all items excluding fresh food was 2.4% in September 2024. While the impact of past import price rises has eased, services prices remain stable, indicating a shift in inflation drivers from cost-push factors to domestic wage increases.
Outlook: The CPI is expected to continue rising moderately, with underlying inflation gradually increasing as the output gap improves and medium- to long-term inflation expectations rise.
Monetary Policy:
Policy Adjustments: In July 2024, the Bank of Japan raised the policy interest rate to around 0.25% and outlined a plan to reduce Japanese government bond purchases, aiming for sustainable achievement of the 2% price stability target.
Future Stance: The Bank plans to continue with gradual policy rate hikes, maintaining accommodative financial conditions to support economic activity.
Governor Ueda emphasized the importance of a balanced approach to monetary policy, ensuring that adjustments are made cautiously to avoid economic shocks and to support the ongoing virtuous cycle between wages and prices.
Q&A follows at 1.45 pm local time on Monday
- 0445 GMT (Monday), 2345 US Eastern time (Sunday)
Perhaps we will get better clues on near term monetary policy from this. The Bank next meet in December 18 -19.
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