During his remarks at a press conference on Tuesday morning, Bank of Japan Deputy Governor and Monetary Policy Board member, Ryuzo Himino, indicated that while the primary trend of the Bank of Japan is to approve further increases in interest rates, the bank must carefully monitor various risks both upward and downward, both domestically and internationally.
The key points mentioned in the statements from the Deputy Governor of the Bank of Japan today are:
The Bank of Japan will raise interest rates, but risks must be monitored carefully. It is likely that the central bank will raise interest rates if its economic forecasts are realized. There are signals that may drive us to raise interest rates. The Bank of Japan hopes that this year's wage negotiations will yield strong results. Reports from the regional branch managers of the Bank of Japan regarding wage expectations were generally strong. Many surveys show that the percentage of companies expecting to raise wages and the pace of expected wage gains are at or above last year's levels. Trump's inauguration speech is likely to provide broad direction for American policy. We expect the U.S. economy to remain strong at this time. We will compile a report on the Bank of Japan's outlook along with an analysis of various data and information. In monetary policy guidance, determining the likely timing for monetary policy changes is difficult. In the Bank of Japan's policy meeting next week, the Board is likely to discuss whether to raise interest rates and make a final decision on proceeding with the exit from monetary easing. It is not normal for real interest rates to remain negative for a long period once shock and recession factors dissipate. We expect Japan to move out of its very negative real interest rate environment. In terms of monetary policy guidance in the near term, the Bank of Japan needs to closely examine economic, price, and financial developments. Inflation expectations in Japan have gradually risen and are now around 1.5%. It is difficult to say whether the inflation risk is tilted upward or downward at this time. There is no so-called checklist of sorts to assist the Bank of Japan in making its decision about raising interest rates in January. We will not directly link Trump's inauguration speech to the January decision on interest rates, but we will try to strike a balance under new U.S. policy measures. When the time is right, the Bank of Japan should change its monetary policy without delay. Short-term movements in long-term interest rates will not serve as the basis for our monetary policy decision. The main scenario is that wages will grow strongly this year as they did last year, but we want to scrutinize all information ahead of the Bank of Japan meeting next week.
