FLASH BoJ Governor Ueda (Press Conference) says the Bank is gathering information on how the Kumamoto earthquake is affecting the economy and prices
GUIDANCE
Bank will guide monetary policy from the standpoint of sustainably and stably achieving its price stability target.
Bank will hold careful discussions at its next monetary policy meeting, keeping in mind the risk of inflation overshooting more than in the past.
Bank does not need to wait for data showing inflation has completely stabilised at 2% before making policy decisions.
Bank will conduct monetary policy to ensure it does not fall behind the curve.
Bank could accelerate interest rate hikes if it judges that financial conditions are too accommodative.
BoJ is not in the same policy cycle as the Federal Reserve and the ECB.
FX
The yen has depreciated to some extent over the past year.
The impact of foreign exchange movements on inflation is greater than it was previously.
FX is one of the key determinants of prices.
RATES
Interest rates have risen since the Bank's last rate hike.
Bank will consider the timing and pace of interest rate adjustments while assessing the likelihood and risks surrounding its baseline outlook for the economy and prices.
Bank is still monitoring the impact of the interest rate hikes implemented some time ago.
It could, in some cases, take up to two years to assess the effects of an interest rate hike.
If the Bank is forced to raise interest rates rapidly, it would destabilise markets and undermine the government's efforts to promote investment-led growth.
Bank cannot clearly determine how far interest rates are from the neutral rate.
FINANCIAL CONDITIONSFinancial conditions have remained accommodative even after the Bank's last rate hike.BOND MARKET
Appropriate monetary policy and market confidence in long-term fiscal sustainability are important for stable bond yields.
It would be inappropriate to comment in advance on whether the Bank will increase its bond purchases.
Bond market functioning is improving, although it has not yet fully recovered.
Recent bond yields are reflecting a range of underlying economic fundamentals.
Yield curve control remains part of central banks' policy toolkit, but the likelihood of the Bank of Japan using it again in the near future is not very high.
VOLATILITYWill not comment on daily market moves.ECONOMY
Economy expected to grow moderately.
Projected real GDP growth is more or less unchanged from the Bank's April Outlook Report.
It will take considerable time for the impact of interest rate decisions to spread broadly through the economy and prices.
INFLATION
CPI inflation rate is expected to slow to around 2% in the second half of the Bank's projection period.
Y/Y CPI inflation rate is likely to accelerate to a level clearly above 2% from H2 FY26.
There is a risk that underlying CPI inflation could overshoot the Bank's 2% price stability target.
Maintaining the perspective of stabilising underlying CPI inflation at around the 2% target is important.
It is more important than ever to remain mindful of the risk of inflation overshooting the Bank's target.
Bank will aim to achieve its inflation target sustainably and stably under its responsibility.
Underlying inflation is approaching 2%, and the Bank cannot ignore the risk of inflation overshooting its target.
Risk of inflation overshooting the Bank's 2% target is potentially too significant to ignore.
When underlying inflation was well below 2%, overlooking upside inflation risks carried little cost, but with inflation now nearing 2%, the cost of overlooking those risks has become significant.
One area of focus is how higher memory chip prices are feeding through into broader prices.
Wholesale price increases seen so far are expected to gradually feed through into consumer prices from July onwards.
Closely watching inflation expectations, as they are closely linked to underlying inflation.
There are differing views among Board members on the inflation outlook and that he hopes to reach some form of conclusion at upcoming Monetary Policy Meetings.
RISKS
It is necessary to closely monitor the Middle East situation and its impact on financial and FX markets, as well as Japan’s economy and prices.
Cannot assign a zero to the risk of Japan slipping back into deflation.
OUTLOOK REPORTBoard Members Takata and Tamura proposed adding further descriptions on prices to the Outlook Report, but their proposal was rejected.GOVERNMENT POLICIES
A lower sales tax rate is positive for real income.
Important for the government to ensure markets maintain confidence in the long-term sustainability of Japan's public finances.
Not in a position to tell the government how to conduct fiscal policy.
Understands the government's fiscal policy is not solely expansionary and also takes fiscal discipline into account.
CORPORATE
Has not seen an increase in corporate bankruptcies attributable to higher interest payments.
Bank's analysis shows corporate bankruptcies are primarily due to labour shortages and other factors, rather than higher interest payments.
Bottlenecks to capital expenditure are primarily due to labour shortages and higher material costs, rather than higher interest rates.
AI
There is a degree of sustainability to AI-related capital expenditure.
AI-related spending is itself contributing to upward pressure on prices.
AI-related investment could lower prices if it improves productivity, although it is unclear when that effect would materialise.
EARTHQUAKE
Kumamoto earthquake is not disrupting financial system functions in any major way.
Bank is gathering information on how the Kumamoto earthquake is affecting the economy and prices.
Bank needs to assess the impact of supply chain disruptions caused by the Kumamoto earthquake.