BoJ Summary of Opinions: Member says uncertainty is extremely high over outlook
The Bank of Japan (BoJ) published the Summary of Opinions from the June monetary policy meeting, with the key findings noted below.
Key quotes
One member said: While much of the hard data for April and May has been relatively solid, it is likely that the effects of tariff policies are yet to materialize.
One member said while the impact of U.S. tariff policy will certainly exert downward pressure on firms’ sentiment, the bank needs to take some time to examine the magnitude of the impact on the real economy.
One member said despite the impact of U.S. tariff policy, many firms will likely continue to raise wages to address labor shortages, make high levels of business fixed investment.
One member said although the direct impact of U.S. tariff policy has not been observed so far, Japan’s economy has been somewhat stagnant.
One member said Japan’s economy at crossroads between making a transition to a “growth-oriented economy driven by wage increases and investment” and falling into stagflation.
One member said although uncertainty regarding trade policies remains extremely high, on the domestic front, wage developments have been solid, and the CPI has been slightly higher than expected.
One member said as the price of rice could affect perceived inflation and inflation expectations, it is necessary to closely monitor developments in rice prices.
One member said as US, Europe and emerging economies leaning toward accommodative policies, Japan’s economy could unexpectedly be pushed up or experience inflationary pressure.
One member said if its outlook for economic activity and prices will be realized, the bank, in accordance with improvement in economic activity and prices, will continue to raise the policy interest rate.
One member said given high uncertainty, the bank should, at this point, maintain accommodative financial conditions with the current interest rate level and thereby firmly support the economy.
One member said even though prices have been somewhat higher than expected, it is appropriate for the Bank to maintain current policy, given downside risks stemming from U.S. tariff policy and situation in the Middle East.
One member said with extremely high uncertainty in the outlook, it is appropriate for the Bank to maintain the current policy interest rate for the time being.
One member said increased volatility in the super-long-term zone may spill over to the entire yield curve, thereby spreading unintended tightening effects to the market as a whole.
One member said situation of government bond markets around the world has been a major topic of discussion, such as at international meetings, attention is warranted on the possibility that developments overseas will spread to Japan.
One member said although the CPI has been higher than expected, the pass-through of higher wages to services prices seems to have plateaued.
One member said with inflation being at levels higher than expected, the bank may face a situation where it should adjust the degree of monetary accommodation decisively, even when there is high uncertainty.
Market reaction
Following the BoJ’s Summary of Opinions, the USD/JPY pair is down 0.03% on the day to trade at 144.90 as of writing.
Bank of Japan FAQs
The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.
The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.
The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.
A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.