BoJ’s Takata: BoJ must gradually shift policy even after January's rate hike

Bank of Japan (BoJ) Board Member Hajime Takata said on Wednesday, “the BoJ must gradually shift policy, even after January's rate hike, to avoid upside price risks from materialising.“

Additional quotes

Japan's real interest rates remain deeply negative, no change to accommodative monetary environment.

Must adjust degree of monetary support further if economy moves in line with BoJ’s forecasts.

BoJ also needs to take cautious approach in shifting policy due to uncertainty over the US economic outlook, difficulty of gauging neutral rate level.

Indicating set neutral rate level could be taken by markets as forward guidance, may cause challenges in terms of policy flexibility..

Companies maintaining bullish investment stance.

Consumption rising moderately as a trend.

Expect consumption to continue increasing moderately.

Long-term inflation expectations heightening steadily.

Expect firms to deliver solid pay hikes in this year's wage talks.

Expect inflation to approach BoJ’s target driven by domestic factors.

Must be mindful of risk inflation may accelerate more than expected due to weak Yen, bumper pay hikes.

Hopeful Japan will progress toward durable achievement of BoJ’s price target from fiscal 2025 onward due to solid wage gains, home-made inflationary pressure.

Risk of big market fluctuation has receded, giving the BoJ more policy flexibility.

Market reaction

As of writing, USD/JPY is flriting with intraday lows near 151.80 on these above comments, down 0.12% on the day.