It should be noted that BoJ’s decade-long ultra-loose stimulus program has drawn intense criticism for broadening price pressures in the world's third-largest economy
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FXMAG.COM: Could you please comment on the Japanese CPI? What will be the BoJ's next steps?
David Kindley (Orbex): Last Friday (Apri 21st) Japan’s core consumer price index (CPI), which includes energy costs, came in at 3.1% for March, matching a median market forecast. However, the year-on-year rise in the so-called "core core" index hit its highest rate since December 1981, and was up 3.8% year-on-year. This led investors to believe that the pressure is now on for the Bank of Japan (BoJ) to begin raising rates.
Market participants should instead be focusing on the BoJ's quarterly outlook report due after the meeting
David Kindley (Orbex): It should be noted that BoJ’s decade-long ultra-loose stimulus program has drawn intense criticism for broadening price pressures in the world's third-largest economy. That being said, BoJ Governor Kazuo Ueda remains adamant that inflation in Japan is transitory as it’s mostly attributed to higher import prices. Ueda has vowed to keep monetary policy ultra-loose until there is concrete evidence that the current rise in inflation in Japan is driven by strong demand rather than import and supply pressures. It is highly likely then, that at the upcoming BoJ Interest Rate Decision on April 28, Ueda will opt to make no changes to BoJ’s ultra-loose policy and there will be no increase to their key interest rate which stands at –0.1% since January 2016.
David Kindley (Orbex): Market participants should instead be focusing on the BoJ's quarterly outlook report due after the meeting. The report will include BoJ’s inflation forecasts until 2025 and can provide important insights into BoJ’s future monetary steps.
