BOJ Summary of Opinions – March meeting

Full text of the Bank of Japan Summary of Opinions of the March 18 and 19 meeting is here.

• 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.
• One member said food price rises can be categorised as supply shock but could become sustainable, so must be vigilant to impact on inflation expectations
• One member said soaring agriculture goods prices may not be temporary, could affect households inflation expectations and underlying inflation
• One member said upward price pressure may continue for some time
• One member said we are close to achieving our price goal due to domestic inflationary pressure, must communicate based on such assumption
• One member said BOJ will continue to hike rates if economy, prices move in line with forecast but should not have preset idea on specific policy management

• One member said for the time being, BOJ must scrutinise U.S. policy impact on global economy and markets as well as effect of BOJ’s past rate hike on Japan’s economy, then move to next rate hike
• One member said we don’t have enough data to gauge impact of January policy change, recent long-term rate moves, on economy
• One member said downside risks from U.S. heightening sharply and could have negative impact on Japan’s economy, so we must be even more cautious on deciding next rate-hike timing
• One member said downside risks to Japan’s economy heightening due to U.S. tariff policy, supply chain disruptions, so must keep policy steady for time being
• One member said at next meeting, we must scrutinise inflation expectations, chance of upside price risk materialising, progress in wage hikes, in setting monetary policy

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Let me propose the key points from all this:

• BOJ will continue to hike rates if economy, prices move in line with forecast
• downside risks from U.S. heightening sharply and could have negative impact on Japan’s economy, so we must be even more cautious on deciding next rate-hike timing
• downside risks to Japan’s economy heightening due to U.S. tariff policy, supply chain disruptions, so must keep policy steady for time being

Those final two are why the Bank is on hold and looks like could be for another few meetings. The next statement is due on May 1, perhaps we’ll have enough certainty by then for a rate hike, but given the tariff slap, 25% on vehicles, Japan’s economy may faca bit of a chill.