During the Monetary Policy Meeting, the Policy Board of the Bank of Japan unanimously decided to set the guideline for money market operations for the intermeeting period. The Bank aims to maintain the uncollateralized overnight call rate at around 0.25 percent.
Japan’s economy has shown moderate recovery with some areas experiencing weakness. Overseas economies have been growing moderately overall. Exports and industrial production have remained relatively stagnant, while corporate profits have improved, leading to a moderate increase in business fixed investment. The employment and income situation has seen moderate improvement. Despite price rises and other factors, private consumption has been on a moderate increasing trend. Housing investment has been weak, and public investment has been stable. Financial conditions have been accommodative. The consumer price index (CPI) excluding fresh food has seen a year-on-year increase in the range of 2.5-3.0 percent, mainly driven by moderate rises in services prices due to factors like wage increases. Inflation expectations have moderately risen.
Japan’s economy is expected to continue growing above its potential rate, supported by moderate growth in overseas economies and the strengthening of a virtuous cycle from income to spending. While the impact of past import price increases on consumer prices is expected to diminish, factors such as the dissipation of government measures suppressing CPI inflation are likely to push up the year-on-year CPI increase through fiscal 2025. Underlying CPI inflation is projected to gradually rise as the output gap improves and medium- to long-term inflation expectations increase. By the second half of the projection period in the July 2024 Outlook for Economic Activity and Prices, CPI is expected to align with the price stability target.
There are high uncertainties surrounding Japan’s economic activity and prices, including developments in overseas economic activity and prices, changes in commodity prices, and domestic firms’ wage and price-setting behavior. It is crucial to closely monitor financial and foreign exchange market developments and their impact on Japan’s economic activity and prices, especially as recent shifts in firms’ behavior towards raising wages and prices make exchange rate movements more likely to influence prices.
(This message is quoted from Internet information and is not the opinion of this website.)