Bank of Japan To Keep Current Policy For Now: All 2023 Blog Articles Are Completed.

 

Bank of Japan won't rush to change policy because of Fed's outlook: chief

Article Source:  https://mainichi.jp/english/articles/20231219/p2g/00m/0bu/036000c

Ideas:

The Bank of Japan is most likely not going to show its hand about what is going to do in the future, as a way to not upset the markets, if it does something different than what is said.

At this time, as of news about the Japanese economy, the Japanese economy is not in a good condition for changes in the BOJ policy as the economy, again, has fallen into recession.

Inflation might indeed be decreasing, but its the wrong type of inflation that the BOJ is looking for, as its looking for consumer demand and consumer spending to lift up the economy, not companies passing-on their costs.

If and when the US Federal Reserve does reduce its key rate, that will decrease the variance between the US rate and the Japanese rate, which will then increase the Japanese yen, and it will not be a weak as it is now.

The problem still will be will the Japanese yen, which was weak become stronger and by how much, which might dissuade some foreign tourists from going to Japan.

A stronger yen, means less profits for Japanese export companies as they depend on a weak yen for their profits overseas.

But at the same time, a stronger yen, will be better for the domestic Japanese economy, and for improved import prices.

If Japanese financial institutions, including most banks, were having any detrimental impacts to due the negative rate, it would have been known many years ago, as the negative rate policy has been in existence since around 2014.

The financial markets can speculate all they want but the BOJ is not going to do anything until its ready to do something, and when it does something, the change might be so small that in the Japanese economy might not even notice any changes.

And when it does make some changes, it will test the markets to see just how the changes are going to affect the financial markets and maybe the stock market too.

The challenge for wage growth is not with large Japanese companies, but with small and midsize companies who don't have any room with their profit margins to increase wages as this time.

That might mean up to 70 percent of Japanese workers, in April of 2024, might not see a wage increase.

Not only wage increases but consumer spending are the keys to economic improvement, but if wages are not high enough, then again, consumer spending might not be enough for the Bank of Japan to make significant changes.

But again, unfortunately, the Japanese economy, has fallen into a recession because of the Oct. to Dec. quarter having negative growth, which is two consecutive quarters for negative growth.

As a result, because of the negative growth situation, the BOJ most likely will delay any real changes until its sees better economic growth.

Have a nice day and be safe!