BOJ chief Ueda stops short of declaring 2% price goal met

SAO PAULO: Bank of Japan Governor Kazuo Ueda said it was too early to conclude that inflation was close to sustainably meeting the central bank's 2% inflation target and stressed the need to scrutinise more data on the wage outlook.

"I don't think we are there yet," Ueda told a news conference after attending the G20 finance leaders' meeting in Sao Paulo, when asked whether achievement of the price goal was already in sight.

"We need to confirm whether a positive wage-inflation cycle would kick off and strengthen," Ueda said, adding that companies' annual wage negotiations with unions later this month would be crucial in making the judgment.

With inflation having exceeded 2% for well over a year, many market players expect the BOJ to end its negative interest rate policy by April.

Ueda's remarks contrasted with those of BOJ board member Hajime Takata in Japan earlier on Thursday, who said sustained achievement of 2% inflation was already in sight.

The yen and Japanese bond yields rose after Takata's hawkish remarks, which fueled speculation the BOJ could end negative rates in March rather than the widely held view that such a move would come in April.

Big firms will settle negotiations on next year's pay with unions on March 13, ahead of the BOJ policy meeting on March 18-19. Economists project wage hikes of about 3.9% on average, exceeding a 3.58% pay rise deal struck in 2023 that was the highest in three decades.

Ueda said it was notable that unions are demanding pay increases higher than those made last year, and that many firms appear keen to offer wage hikes.

But he said the BOJ needs to scrutinise the collective outcome of the wage negotiations, as well as the results of its hearings conducted on companies and other data that offer clues on whether wages and inflation will continue to rise in tandem.

Ueda stopped short on saying whether the preferred choice for ending negative rates would be in March or April.

Japan unexpectedly slipped into a recession at the end of last year with the economy shrinking an annualised 0.4% in October-December on weak corporate and household spending.

Despite the soft reading, Ueda said there was no change to the BOJ's view the economy was on track for a moderate recovery.

"While real wages may not immediately turn positive, there's hope that this year's annual wage talks will yield solid results that would give consumption a sustained boost," Ueda said.

Capital expenditure also will likely increase, given companies are retaining strong investment plans, he added.

The BOJ has stressed its readiness to phase out its massive stimulus once it has judged that Japan can achieve its inflation target in a stable, sustainable fashion.

In an effort to reflate growth and keep inflation stably at its 2% inflation target, the BOJ currently guides short-term rates at -0.1% and the 10-year government bond yield around 0%. - Reuters

Follow us on our official WhatsApp channel for breaking news alerts and key updates!

Bank of Japan , inflation , Kazuo Ueda


Next In Business News

PepsiCo's first-quarter results beat as international demand drives growth
Spotify profits up, but lower marketing hits user growth
Rafizi: Economy continues to strengthen along with Bursa Malaysia
MAHB's 1Q24 traffic hits more than 90% recovery rate against 1Q19
IRDA's RM636bil investment goal to help propel Malaysia into top 30 global economies
DXN Holdings net profit for FY24 rises to RM310.99mil
Ringgit closes slightly lower against US dollar
Inta Bina bags RM170mil construction job
PETRONAS Gas commits to sustainability, announces total dividend of 72 sen per share
Crest Builder bags RM486mil condo job

Others Also Read