BoJ’s Noguchi: essential for BoJ to maintain ultra-loose monetary policy

Bank of Japan board member Asahi Noguchi:

• Essential for BOJ to maintain ultra-loose monetary policy, seek
  balance in labour supply and demand
• Japan is seeing
  wage hikes unseen in the past via spring wage negotiations
• Essential to
  continue to maintain appropriate balance between labour supply and
  demand through the continuation of its accommodative monetary policy
  to achieve the 2% price target
• Japan must achieve
  positive wage-inflation cycle as soon as possible and for this,
  service prices must keep rising
• Last year’s spring
  labour-management negotiations have triggered an unprecedented wave
  of wage increases
• Another factor that
  is key is for small manufacturers to be able to smoothly pass on
  rising wage costs to prices

• If wage hike
  translates into higher prices, that will show through rise in service
  prices and this trend is clearly appearing

• Focus now is on the pace at which the policy rate will be adjusted
  and at what level it will eventually stabilize
• Long-term neutral
  interest rate is highly likely to be lower than that of other
  countries

• At some point in future, it’s desirable to start shrinking BOJ’s
  balance sheet
• Steps BOJ decided in
  March is a move toward this direction of future shrinking of BOJ’s
  balance sheet

• I dissented to BOJ’s March decision since I thought it would be
  appropriate to maintain JGB buying under negative rate

• Rise in service prices not driven mainly by wage hikes yet

• Japan’s economyin in a moderate recovery trend, but recently growth has stalled

more to come

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