BOJ’s Takata says must hike rate more if economy moves in line with BOJ forecasts

Bank of Japan policy board member Takata speaking.

• Japan’s real interest rates remain deeply negative, no change to accommodative monetary environment.
• Must adjust degree of monetary support further if economy moves in line with BoJ’s forecasts.
• BoJ must gradually shift policy, even after January’s rate hike, to avoid upside price risks from materialising.
• BoJ also needs to take a cautious approach in shifting policy due to uncertainty over U.S. economic outlook, difficulty of gauging neutral rate level.
• Indicating set neutral rate level could be taken by markets as forward guidance, may cause challenges in terms of policy flexibility.
• Firms are maintaining a bullish investment stance
• Conumption is rising moderately as a trend
• Long-term inflation expectations are rising steadily
• Expect firms to deliver solid wage rises in this year’s wage talks
• Expect inflation to approach the BoJ’s target, driven by domestic factors
• Must be mindful of the risk that inflation may accelerate more than expected due to the weak yen and bumper pay hikes

• Hopeful Japan will progress toward durable achievement of the BOJ’s
  price target from fiscal 2025 onward due to solid wage gains,
  home-made inflationary pressure
• Uncertainties remain
  over the US economy

The yen is aging a few points on Takata’s comments

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