BoJ Summary of Opinions: Member sees inflation somewhat exceeds expectations

The Bank of Japan (BoJ) published the Summary of Opinions from its March monetary policy meeting, with the key findings noted below.   

Key quotes

One member said inflation is somewhat overshooting expectations.

One member said wage hikes in spring wage talks are somewhat exceeding last year's figures, with nominal wages rising at a pace in line with the achievement of the BOJ's price goal.

One member said rising wages are likely to underpin consumption.

One member said there are questions about whether wage gains would be sustainable.

One member said global economic uncertainty is heightening.

One member said heightened uncertainty over the global economy could be one new risk factor since our previous meeting in January.

One member said U.S. inflationary risk and economic worsening risk are both heightening.

One member said underlying inflation is highly likely to steadily accelerate toward 2%, given steady price rises and the outcome of wage talks.

One member said the new U.S. administration's policies could affect Japan's price moves via fluctuations in markets and FX rates. 

Market reaction  

Following the BoJ’s Summary of Opinions, the USD/JPY pair is up 0.14% on the day to trade at 155.30 as of writing. 

Bank of Japan FAQs

What is the Bank of Japan?

The Bank of Japan (BoJ) is the Japanese central bank, which sets monetary policy in the country. Its mandate is to issue banknotes and carry out currency and monetary control to ensure price stability, which means an inflation target of around 2%.

What has been the Bank of Japan’s policy?

The Bank of Japan embarked in an ultra-loose monetary policy in 2013 in order to stimulate the economy and fuel inflation amid a low-inflationary environment. The bank’s policy is based on Quantitative and Qualitative Easing (QQE), or printing notes to buy assets such as government or corporate bonds to provide liquidity. In 2016, the bank doubled down on its strategy and further loosened policy by first introducing negative interest rates and then directly controlling the yield of its 10-year government bonds. In March 2024, the BoJ lifted interest rates, effectively retreating from the ultra-loose monetary policy stance.

How do Bank of Japan’s decisions influence the Japanese Yen?

The Bank’s massive stimulus caused the Yen to depreciate against its main currency peers. This process exacerbated in 2022 and 2023 due to an increasing policy divergence between the Bank of Japan and other main central banks, which opted to increase interest rates sharply to fight decades-high levels of inflation. The BoJ’s policy led to a widening differential with other currencies, dragging down the value of the Yen. This trend partly reversed in 2024, when the BoJ decided to abandon its ultra-loose policy stance.

Why did the Bank of Japan decide to start unwinding its ultra-loose policy?

A weaker Yen and the spike in global energy prices led to an increase in Japanese inflation, which exceeded the BoJ’s 2% target. The prospect of rising salaries in the country – a key element fuelling inflation – also contributed to the move.