Author: Toru Fujioka
Article: Original article
Publication date: Monday, December 19, 2022
The Bank of Japan (BOJ) is expected to leave its monetary policy unchanged at this year’s last meeting on December 20, while investors are in search of clues about the central bank’s course after Haruhiko Kuroda’s term ends.
According to forecasts of all 47 economists surveyed by Bloomberg, the BOJ will maintain its negative interest rate of -0.1% and yield curve control program (YCC) as they are.
Therefore, observers are more focused on Kuroda’s comments on inflation prospects and the possibility of a policy revision, or at least a renegotiation of the agreement between Japan’s central bank and government.
Kuroda stresses that interest rate hikes won’t take place until the bank sees stable inflation supported by rising wages. The results of the annual spring’s negotiations on wages will be a key sign, which will be known only a few weeks before Kuroda leaves his position of BOJ Governor after a 10-year term on April 8.
That forces to pay more attention to any hints of events that could potentially drive monetary policy changes after the end of Kuroda's term. About 50% of BOJ watchers surveyed by Bloomberg expect monetary tightening with a new Governor next year.
Prime Minister Fumio Kishida plans to revise a 10-year-old agreement with the central bank and consider adding some flexibility to a 2% inflation target, as reported by local media on Saturday.
BOJ officials see a chance for policy changes in the following year after studying the pace of wage growth and the scale of a global economic slowdown, stated people familiar with the matter.
According to UBS Group and SMBC Nikko Securities analysts, the cost of living in Japan continues to grow and exceed the BOJ’s target level of 2% in the upcoming months, in contrast to inflation slowdown in other major economies.
BOJ officials consider the current level of inflation to be stronger and more widespread than it was previously expected, and some people familiar with the matter also add that a key inflation measure, excluding fresh food, might reach 4%. However, their opinion on the next year’s price growth slowdown remains unchanged.
Forecast: USDJPY is likely to rise