Asahi Noguchi, member of the board of directors of the Bank of Japan:
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It is essential that the BoJ maintains an ultra-easy monetary policy and seeks the balance between labor supply and demand
- Japan sees unprecedented wage hikes thanks to spring wage negotiations
- It is essential to continue maintaining an appropriate balance between labor supply and demand through the continuation of its accommodative monetary policy to achieve the 2% price target.
- Japan must achieve a positive wage inflation cycle as quickly as possible and for this to happen, service prices must continue to rise.
- Labor-management negotiations last spring triggered a wave of unprecedented wage increases.
- Another key factor is that small manufacturers are able to seamlessly pass on rising labor costs to prices.
- If rising wages translate into rising prices, this will translate into rising prices for services and this trend is clear.
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The focus now is on the pace at which the policy rate will be adjusted and at what level it will eventually stabilize.
- The long-term neutral interest rate will most likely be lower than in other countries
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In the future, it would be desirable to start reducing the BoJ’s balance sheet
- The measures decided by the BOJ in March are consistent with a future reduction in the BOJ’s balance sheet.
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I disagree with the BOJ’s March decision because I thought it would be appropriate to keep JGB purchases at negative rates.
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The rise in service prices is not yet mainly due to rising wages
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Japanese economy: moderate recovery trend, but recent growth stagnation
more soon
This article was written by Eamonn Sheridan at www.forexlive.com.
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