HIGH UNCERTAINTY SURROUNDS OVERSEAS ECONOMY
"When looking at risks, uncertainty surrounding the overseas
economy is extremely high given the war in Ukraine and commodity
price developments. We must be vigilant to financial market
moves and their impact on Japan's economy."
INFLATION RISK
"Uncertainty regarding domestic and overseas economic and
market developments is extremely high. While trend inflation is
gradually heightening, it will take some time to achieve our
inflation target. As such, the risk of missing our price target
with premature monetary tightening is bigger than the risk of
experiencing inflation exceeding 2% due to a delayed tightening.
The cost of waiting for trend inflation to heighten is low."
MAINTAIN EASY POLICY FOR NOW
"Many board members believe that inflation will ease below
2% toward the latter half of this fiscal year, then bounce back
after that. But the forecast of the rebound is based on various
assumptions and bound with uncertainty. As such, I want to be
patient here and maintain easy policy a bit longer."
ON POLICY REVIEW
"We don't have anything in mind in terms of tying this to a near-term policy tweak.
"We might do a nearing with academics ... or use our regional branch networks, and exchange views with various people." "We've been conducting non-conventional monetary policy for 25 years. We're seeing trend inflation gradually heightening. We might see inflation stably achieve our target. It's good to be ready for in case things proceed as we hope, and when it doesn't." CHANCE OF POLICY SHIFT BEFORE CONCLUSION OF REVIEW
"Yes. If we need to change policy due to changes in economic and price developments, we will do so. Inflation has yet to be seen stably achieving 2% now, but that could change in which case we could change policy." DEFINING TREND INFLATION
"There's no single data we can use to determine trend
inflation. One idea, however, is that our forecasts of inflation
half year, one year and 1.5 years ahead would reflect our view
of trend inflation ... Our forecasts show that we're getting
quite close to achieving (our price target). But we're not quite
confident about our longer-term inflation forecast, so we need
to discount that point."
TO KEEP A VIGILANT STANCE
"It will take more time to achieve trend inflation (of 2%)
so we will maintain current policy for now. But it's true we're
seeing side-effects here and there. We need to closely
scrutinize these developments. I'm not thinking of anything
specific now. But we must avoid getting the balance of benefits
and costs wrong, so will be vigilant and disclose information as
much as possible."
ON YCC
"When trend inflation heightens, real interest rates will
fall and the effect of monetary easing as well as its
side-effects will increase ... That's why we must meticulously
monitor the side-effects of the policy."
ON HOW LONG BOJ NEEDS TO CONCLUDE PRICE GOAL MET
"We don't necessarily need to wait for next year's wage
negotiations (in deciding whether trend inflation will hit 2%).
This year's inflation and corporate profits will also be key,
and could allow us to judge whether conditions are falling in
place (for trend inflation to sustainably hit 2%)."
ON REMOVAL OF INTEREST RATE FORWARD GUIDANCE
"We have a commitment to maintain our interest rate targets
under the YCC intact until trend inflation hits (or price
target), so we'll do what we can within that framework."
THE REVIEW'S EFFECT ON BOJ DEBATE ON EXITING EASY POLICY
"The chance of us normalising monetary policy (before
concluding the review) isn't zero. In that case, the outcome of
the review won't be available in time to make use of its
findings. We're not doing this review for the sake of
normalising policy, though.
"On the other hand, we could unfortunately see the timing of an exit get delayed and take two, three, or four more years. In that case, we need to think about how to mitigate the side-effects and make the current easy policy sustainable." ON THE TIMELINE OF POLICY REVIEW "The term of myself and the two deputy governors is five years. So the idea is to do a review in time so that the finding can be used for our policy decisions later in our term."
(Reporting by Leika Kihara; Editing by Sherry Jacob-Phillips)
Messaging: leika.kihara.reuters.com@reuters.net))