Summary:
Uchida Shinichi, Deputy Governor of the Bank of Japan, said that the Bank of Japan will not raise interest rates, financial markets are unstable, and it needs to maintain monetary easing. At 9:30 this morning, Deputy Governor of the Bank of Japan Uchida Shinichi held a press conference, and the main points he made were as follows:
Although some areas of the economy remain weak, the Japanese economy is recovering moderately, and in retrospect, the economy continued to grow at a good rate in the first half of 2023. The growth rate then turned temporarily negative, partly due to the shutdown of production from Some car manufacturers accepted, but the improving trend has continued, and the economy is expected to continue to grow at a higher rate.
The labor shortage is likely to continue, which will lead to higher wages. As a result of structural demographic changes in Japan, the gap between the working-age population and the number of employed people has narrowed rapidly since then and is now about 6.5 million people. The space for additional labor will be greatly limited.
Despite some fluctuations, the CPI growth rate eased slightly, with the latest figure in June at 2.6 percent. Looking at some details, the contribution of food products and other goods continued to be affected by the pass-through of cost increases to consumer prices resulting from the previous rise in import prices. As these effects diminished, the positive contributions of food products and other goods declined moderately. While price increases resulting from higher import prices declined, wage increases were increasingly reflected in prices. As for the forecast, the annual increase rate in the CPI for all items excluding fresh food is expected to reach 2.5% in 2024 and is likely to remain at around 2% in 2025 and 2026.
At the monetary policy meeting held last week, the Bank of Japan decided to raise the short-term interest rate by 0.15 percentage points, the second year that this rate has remained above 2%. Import prices have become positive on an annual basis, reflecting the depreciation of the Japanese yen, so the Bank of Japan confirmed that the interest rate will be maintained at 0.25%.
It is necessary to maintain the easing policy, and if expectations threaten these market developments, the interest rate path will certainly change, so the Bank of Japan will not raise the interest rate when financial markets are unstable.
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