Bank of Japan board member Seiji Adachi speaking.
- Conditions are already in place for the BOJ to start normalizing monetary policy.
- In normalizing monetary policy, the BOJ must take rate hikes in several stages.
- In normalizing policy, the BOJ must avoid drastic policy change that could stoke fear of a return to deflation.
- The BOJ will raise rates at a very moderate pace, maintaining an accommodative financial environment, until underlying inflation stably and sustainably hits 2%.
- Hiking rates at a rapid pace after the inflation target is met could cause a big shock to the economy.
- The BOJ should raise rates in several stages to achieve smooth policy normalization.
- Even when the BOJ raises rates, it must maintain an accommodative financial environment, meaning the real policy rate should stay below the natural rate of interest.
- At present, there is no need to raise rates rapidly to curb inflation.
- The BOJ must avoid a premature rate hike, using conservative estimates when gauging Japan's natural rate of interest.
- Japan's current real policy rate is sufficiently below the natural rate, meaning an accommodative financial environment remains in place.
- If chance of underlying inflation exceeding 2% heightens, BOJ will raise its policy rate at pace exceeding rate of inflation
- If inflation moves sustainably, stably around 2%, BOJ can guide monetary policy in a way allowing for policy rate to move roughly in line with neutral rate
- Uncertainty over the outlook means cannot project a specific level of the neutral rate
- Consumption is moving in line with the trend projected by the BOJ
- Output, exports and Capex are firm, but the corporate sector appears to be lacking
- Cannot ignore overseas economic uncertainties for time being
- Reversal of yen weakness may intensify, put downward pressure on consumer inflation
- I am somewhat cautious on whether firms will continue sufficient wage hikes next year
- Given global uncertainties, we must scrutinise developments in next year's wage talks
His comments started off gung-ho on rate hikes but lost some gusto towards the end with a few caveats.
