The added comments from BOJ governor in his press conference today:
- We are paying attention to FY2027 wage talks
- Spring wage negotiations in FY2027 will be key in determining whether trend inflation stabilises
- Need to avoid negative effects caused by any drastic rate hike
- Need to also avoid negative impact on financial conditions from excessively fast tightening
- Today’s vote count as a result of constructive discussion among board members
- Will not conduct monetary policy with any concern in mind over what kind of members will join the board
- It is important to closely coordinate with the government
- Will continue to conduct appropriate monetary policy in line with law governing the BOJ
It is no surprise that he is putting a lot of focus on wage talks as being central to the BOJ motivation to take their next monetary policy steps. That was the case in the latest fiscal year, but it also proved to be a double-edged sword in some sense.
The BOJ wanted to wait for more clarity and confirmation from the results of the spring wage negotiations, prefering to only tighten policy after receiving firm evidence of stronger wage pressures.
While the preliminary results were already suggestive during February and early March, the central bank still waited until June before acting. And by then, there was already much damage done to the Japanese economy from higher oil prices as a result of the US-Iran conflict. That not to mention the “bad” mix of cost-push inflation seeping into the economy as well.
So to hear Ueda make mention of putting emphasis on wage talks again, might keep yen bulls in a tighter spot if they were expecting the BOJ to step up the pace of rate hikes moving forward.
Besides that, Ueda is not really trying to make his press conference about addressing the dissenting votes from Asada and Sato. And he is even making it clear that the BOJ will move forward no matter, even if the future composition of board members might change again when Naoki Tamura and Hajime Takata depart in July next year.
Their departures will allow Japan prime minister Sanae Takaichi with another opportunity to make more appointments to the BOJ board, following Asada and Sato. And that could risk an even more dovish balance at the central bank by this time next year.
This article was written by Justin Low at investinglive.com.