Bank of Japan statement, October 31 2024.
- maintains short term interest rate target at 0.25%, as expected, in a unanimous decision
Forecasts for CPI and GDP:
- Board's core CPI fiscal 2024 median forecast at +2.5% vs +2.5% in July
Board's core CPI fiscal 2025 median forecast at +1.9% vs +2.1% in July
Board's core CPI fiscal 2026 median forecast at +1.9% vs +1.9% in July - Board's core-core CPI fiscal 2024 median forecast at +2.0% vs +1.9% in July
Board's core-core CPI fiscal 2025 median forecast at +1.9% vs +1.9% in July
Board's core-core CPI fiscal 2026 median forecast at +2.1% vs +2.1% in July - Board's real GDP fiscal 2024 median forecast at +0.6% vs +0.6% in July
Board's real GDP fiscal 2025 median forecast at +1.1% vs +1.0% in July
Board's real GDP fiscal 2026 median forecast at +1.0% vs +1.0% in July
From the quarterly report:
- Given that real interest rates are at very low levels, BOJ will continue to raise policy rate if economy, prices move in line with its forecast
Will conduct monetary policy from perspective of sustainably, stably achieving 2% inflation target
Japan's economy recovering moderately, although some weaknesses are seen
Underlying consumer inflation likely to be at level generally consistent with 2% target in second half of projection period from fiscal 2024 through 2026
Underlying consumer inflation likely to increase gradually
Uncertainty surrounding Japan's economy, prices remain high
Impact of FX volatility on prices has become larger as firms have become more active in raising prices, wages
Risks to prices skewed to upside for FY 2025
Risks to economic outlook generally balanced
Must be vigilant to financial, FX market moves and their impact on economy, prices
Must scrutinise U.S., overseas economic developments and market moves
Must be vigilant to impact of overseas developments, market moves on Japan's economic and price outlook, risks and likelihood of achieving our projections
Consumption rising moderately as a trend
Inflation expectations rising moderately
Consumption likely to continue rising moderately
Financial conditions remain accommodative
Service prices have continued to rise moderately reflecting wage gains
But effects of pass-through to consumer prices of cost increases have waned
Core core consumer inflation likely to move around 2% as services prices to rise moderately
Medium- long-term inflation expectations rising moderately
Nominal wages clearly rising, pass-through of rising labour costs on sales prices continue to heighten
Cycle of rising wages, inflation likely to continue heightening
Uncertainty over BOJ's economic, price outlook remains high
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The Bank of Japan specifically mentioned FX:
- Impact of FX volatility on prices has become larger as firms have become more active in raising prices, wages
- Must be vigilant to financial, FX market moves and their impact on economy, prices
This is not threatening language, and it really doesn't change the wariness that Japanese authorities have for rapid moves (mainly rapidly weakening yen, of course).
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Background to this is here:
- Bank of Japan Policy Meeting Preview - Don't Hold Your Breath for a Hike
- Preview - Bank of Japan meeting this week - no change to policy expected
- Japanese Inflation Data Impact on USD/JPY; BoJ Meeting Outlook
Still to come is Bank of Japan Governor Ueda press conference at 0630 GMT, 0230 US Eastern time.
