In the Summary of Opinions at BoJ’s January 17-18 monetary policy meeting, it’s repeated noted that it’s important to continue with current monetary easing as well as yield curve control.

The modification of YCC at the December meeting was “aimed solely at making monetary easing more sustainable”. It is “necessary” to “take some time” to examine the effects of the change in YCC.

One member noted the “upward pressure” on long-term interest rates and the distortions on the yield curve. And, BoJ “should curb interest rate rises across the entire yield curve through measures”.

Regarding prices, CPI is expected to fall below 2% from fiscal 2023, and there is “still a long way to go to achieve the price stability target”.

But opinions were more upbeat as one noted that “momentum for wage hikes has grown, and it is possible that a certain degree of base pay increases will be realized”. But it still takes time for wages to see a “sustained increase”.

Firms’ stance has “shifted toward actively raising their selling prices” as seen in the outlook for output prices. Pace of rises in prices of both goods and services is “accelerating”. It’s possible that the significant price shocks since last week will “change the norm for prices”.

Full Summary of Opinions here.

BoJ board member Toyoaki Nakamura, in a speech to business leaders today, emphasized that Japan has not yet reached a point where it can confidently assert that the sustained and stable achievement of BoJ’s 2% inflation target, along with corresponding wage growth, is within reach. He added that the current inflation in Japan is primarily driven by “cost-push factors”.

In light of this assessment, he said BoJ “must patiently maintain current monetary easing for the time being.” Some more time is needed before adjusting the policy.

Nevertheless, Nakamura expressed a positive outlook on Japan’s economy, describing it as recovering moderately. He also anticipates that this moderate recovery will be accompanied by increases in wages, which could play a crucial role in sustaining economic growth and achieving the inflation target.

BoJ Governor Haruhiko Kuroda said, “Unlike other economies, the Japanese economy has not been much affected by the global inflationary trend, so monetary policy will continue to be accommodative,” according to the recording released by the Bank for International Settlements (BIS).

After 15 years of deflation that lasted through 2013, businesses have be “very cautious” in raising prices and wages. “The economy recovered and companies recorded high profits. The labour market became quite tight. But wages didn’t increase much and prices didn’t increase much,” he added.