Bank Japan Gov Ueda – Driver of Japan’s inflation shifting towards rise in domestic wages.

Bank of Japan Governor Ueda spoke , earlier summary post is here:

• Bank of Japan Governor Ueda says economy recovering moderately, some weak signs

USD/JPY spiked:

• USD/JPY volatile on Bank of Japan Governor Ueda speech

And USD/JPY is adding to its gains now:

More, these Headlines via Reuters:

• Japan’s economy recovering moderately albeit some weak signs.Rising corporate profits leading to higher capex.Will continue to raise policy rate, adjust degree of monetary support if economy, prices move in line with our forecasts.Will make policy decision by updating our economic, price outlook with data, information available at the time.Timing of rate hike will depend on economic, price, and financial outlook.Must be vigilant to various risks including overseas, market developments.No change to BOJ’s stance to underpin economic activity.Gradually adjusting degree of monetary support will contribute to durably achieving price target through sustained economic growth.We are seeing big firms’ executives announce stance of continuing solid wage growth.Important for firms to be able to pass on higher labour costs through price hikes.Perception that long-term inflation expectations will heighten gradually is becoming embedded among households, firms.Want to focus on outlook of wage negotiations, how rising wages will spread to price moves.
• Overall trend in private consumption has returned to a moderate increasing trend.Reason for this positive albeit not strong development in private consumption seems to be the clear increase in nominal wages, on the back of a rise in scheduled cash earnings.Income has been rising in both the corporate and household sectors.Virtuous cycle in which this rise leads to higher spending is gradually intensifying.Rate of increase in service prices has been stable.This shows driving force for price rises has been shifting from cost-push factors stemming from the rise in import prices to domestic wage increases.While effects of pass-through to consumer prices of cost increases led by the past rise in import prices are expected to continue to wane, inflationary pressure stemming from wage increases is projected to strengthen.Underlying inflation likely to continue rising moderately.It has become more likely that U.S. economy will achieve a soft landing but necessary to continue to carefully monitor situation.BOJ will carefully assess developments in the U.S. economy, keeping both upside and downside risks in mind.Market sentiment has improved recently but market remains susceptible to economic indicators of various economies and media reports regarding geopolitical risks.BOJ will continue to pay attention to whether fluctuations in global financial and capital markets will affect economic activity and prices in Japan.
• Crucial to achieve sustained increase in real wages such as by raising productivity.Market sentiment improving recently due to receding concern over U.S. economy.We are still seeing conditions where markets could turn volatile depending on economic data, geopolitical risks.We continue to pay attention to whether volatile market moves could affect Japan’s economy, prices.Uncertainty surrounding China’s growth pace is high.U.S. economic trend is firm but need to be vigilant to chance rapid rate hike could affect economy with a lag.Cannot also rule out chance of renewed rise in U.S. inflation.Expect wage-driven inflationary pressure to heighten in Japan.Japan’s inflation to converge around levels consistent with our price target in the latter half of our 3-year projection period through fiscal 2026.Driver of Japan’s inflation shifting away from cost-push factors towards rise in domestic wages.

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USD/JPY jumped above 155 on Ueda’s speech, looking like position driven to me as I think yen bulls and yen bears could both be encouraged by these comments from Ueda. There is no smoking gun I can see the justify hiking rates, or not hiking rates!

What have I missed, let me know in the comments.

This article was written by Eamonn Sheridan at www.forexlive.com.