- The BOJ has stayed on hold as probability of baseline outlook has decreased
- Underlying price trend is still below target
- Prefers utilising more time in evaluating Middle East situation and how it will impact economy, prices
- Takes seriously the fact that there were three board members who dissented on the decision today
- The other six members were mindful of upward risks to inflation
- However, not seeing any immediate urgency to raise interest rates for now
- May raise interest rates if upside risks to prices emerge while downside risks to the economy remain limited
- Any decision will depend on economy, inflation risks beyond what is happening to the Middle East
- Communicating closely with government on monetary policy
This certainly removes a lot of the hawkish elements from the decision earlier in the day. However, at least he points out that the consensus seems to be that policymakers are cautious about upside risks to the inflation outlook. That being said, they will have a lot to think about in trying not to make a misstep on policy setting.
As mentioned earlier, moving too early risks crippling the economy at a time when surging oil prices are already taking a heavy toll on households and businesses. Adding to that, it also goes against the government's fiscal plans and makes worse the Takaichi trade.
Besides that, the reaction here can easily be linked to dealing with cost-push inflation and that is already something monetary policy is not well equipped to handle in the first place. So, there's that.
USD/JPY is now trading back up to 159.30 levels from around 159.00 earlier. This comes as risk trades are also looking more cautious with tech shares weighing down on US futures. S&P 500 futures are down 0.2% with Nasdaq futures down 0.4% currently.
