BoJ’s Himono: The financial and capital markets remain unstable

The financial and capital markets remain unstable.

The BoJ needs to monitor these developments with utmost vigilance.

BoJ also intends to carefully examine the impact these market.

Developments at home and abroad have on the outlet for economic activity and prices, the risks surrounding the outlook, and the degree of confidence in the outlook.

BoJ will adjust the degree of monetary accommodation if it has growing confidence that its outlook for economic activity and prices will be realized.

Will conduct monetary policy as appropriate to achieve the 2% inflation target in sustainable and stable manner while closely communicating with market participants and other stakeholders.

Needs to closely monitor developments in recent market volatilities including weaker stocks and stronger Yen.

BoJ should continue its efforts to refine its approaches to estimate the neutral rate for Japan, and use the results as a useful point of reference.

But BoJ has no other choice but to chart a way forward examining how the economy and prices respond as it conducts monetary policy.

Estimation of the neutral interest rate would not automatically show the right policy path for Japan, at least at the moment.

Our baseline scenario for fiscal year 2025, 2026 envisions a reasonably balanced state where the inflation rate is consistent with the price stability target, and the economic growth is slightly above cruising speed.

The Yen recent appreciation may alleviate the import cost hike and profit squeeze many small and medium-size firms currently face.

But stronger Yen may lower the yen denominated profits of export industries and Japanese multinationals.