Bank of Japan board member Seiji Adachi
- Changing monetary policy frequently to stablise fx moves would lead to big changes in rate moves
- If interest rate moves are too big, that would cause disruptions in household and corporate investment
- Responding to short-term fx moves with monetary policy would affect price stability
- If excessive yen falls are prolonged and expected to affect achievement of our price target, responding with monetary policy becomes an option
- It is possible to consider responding with monetary policy if fx moves cause big changes in inflation expectations
- Japan's economy is recovering moderately, although there are some weak signs
- Consumption holding steady as a whole mainly for service spending
- Japan's economy not slumping but not in strong shape either with various uncertainties remaining
- BOJ must maintain accommodative financial conditions until price goal achieved
- We are not yet at stage where we are convinced that there is sustained achievement of price target, so must maintain accommodative conditions
- We must absolutely avoid raising interest rates prematurely
- If we focus too much on downside risks, inflation may accelerate and might force us to tighten monetary rapidly as a result
- By fixing interest rates at current zero levels until inflation is durably at our price target, we might be forced to hike rates rapidly later and therefore risk hurting economy
- We must look not just at downside but upside risks in guiding monetary policy
- Important to adjust degree of monetary support in several stages, as long as underlying inflation continues to head toward 2%
- Desirable to reduce BOJ's bond buying in several stages, taking into account bond market supply and demand, function, liquidity
- Reducing BOJ's JGB bond buying at a sharp pace could cause damage to economy
- Consumer inflation slowing now but likely to re-accelerate from summer through autumn this year
- If yen declines accelerate or become prolonged, inflation could re-accelerate faster than expected and may require boj to quicken interest rate hike
I don't want to say Adachi sounds hawkish, no one at the BOJ is hawkish, but he is sounding quite forthright with reasons to keep on tightening, albeit at a slow measured pace.
more to come
BoJ's Adachi