BOJ Comments: Updated September 4, 2024.

 

BOJ prepared to raise rates if prices move in line with estimates

Article Source:  https://mainichi.jp/english/articles/20240828/p2g/00m/0bu/021000c

Ideas: 

After a decade or so of the ultra-low monetary policy, perhaps the Bank of Japan is starting to get back to near-normal monetary policy that changes as the economy changes.

The BOJ did increase the rate, slightly twice recently, but as the financial markets remain somewhat volatile or shaky, they might wait until October or even November to make another move.

But the key will be the 2 percent inflation target, as the BOJ has been waiting for inflation to get the 2 percent level, before making any real significant moves.

The BOJ is looking for inflation that is consumer led along with companies that increase prices as consumes buy more or their products, not inflation related to increasing prices due to increase in energy or raw materials.

Yes, the BOJ most likely will not increase the rate in September and maybe not even in October, as the Japan summer heat wave is causing havoc among Japanese households and now its the typhoon season, which causes more havoc in the Japanese economy.

The Bank of Japan is not going to do anything that will upset the markets or Japanese businesses as they are for the most part, "do no harm" focused, and even any rate increases will be limited as to not cause any serious side-affects to the Japanese economy. 

While the US and maybe the EU allowed side-affects, or new of the side-affects the Bank of Japan has repeatedly said the Japanese economy is much too weak for any real rate increases. But that was a few years ago, so now the BOJ might have a slightly different idea.

Later this year could be October or even November or not at all, as the markets were maybe shaken too much with the US news about a possible recession, which of course was not much of anything. as later the news came out the US economy is still strong.

After the historic losses in the Japanese stock market, the BOJ is going to be even more cautious about what it says, as even one news conference or one memo that says anything negative or upsetting could cause the Japanese stock market to go crazy again.

That is the problem with the stock markets, as they are too over-reactive to everything instead of seeing the big picture or taking a long-term view, they react to everything like a young child.

Inflation is a tricky situation as there is inflation related to increases in raw materials and energy, which Japan has to import a lot of, due to it being a resource-poor economy, and then there is inflation related to consumer demand and consumer spending, which is never that strong in Japan or never where it should be, compared to US consumer spending.

The Bank of Japan wants more consumer spending driven inflation and less energy/raw material driven inflation, but as long as the Japanese yen remains weak, imports prices are going to remain high, which means companies will continue to pass-on their costs to the next in the supply chain, including the final retail customer.

Have a nice day!