On the one hand, the Bank of Japan's "stable" inflation expectations, on the other hand, the overall inflation is heating up again, will Kazuo Ueda give up the easing magic weapon YCC?
Japan's CPI, which excludes food and energy, climbed 3.8 percent in April, its biggest gain since 1982. The "explosion" of inflation data means that many companies may raise prices at the beginning of the fiscal year, prompting the central bank to adjust policy. Kazuo Momma, former chief economist of the Bank of Japan, said: "It is certain that the Bank of Japan will raise its inflation forecast in July." ”
Some BOJ watchers believe that the BOJ's April forecast underestimated inflation. Some analysts said the Bank of Japan could sharply raise its inflation forecast in July to coincide with policy normalization.
Kazuo Momma, former chief economist of the Bank of Japan, said:
"The Bank of Japan was basically nailed in on its July hike in inflation forecasts. The BOJ may want to avoid speculation during policy adjustments by keeping forecasts low. ”
Data makes policy change more imaginative
Goldman Sachs economists raised their forecasts for Japan's CPI on Tuesday, saying CPI, excluding food and energy prices, was expected to reach 3.6 percent this fiscal year, well above the Bank of Japan's 2.5 percent forecast. Economists believe that the Bank of Japan will adjust its policy in July.
Japan's latest CPI data will be released on Friday, and there are signs that the government's move may continue to exceed expectations in the arch fire.
Bloomberg Economics' team of Asian economists said: "Japan's CPI for April
The report may have sounded the alarm for the Bank of Japan early on that cost-pushing inflationary pressures are picking up again. Although the Bank of Japan raised its inflation forecast in April, we think this alarm bell will be enough to persuade them to raise their expectations again. ”
Bank of Japan Governor Kazuo Ueda said Japanese inflation is cost-driven and will certainly fall below 2% later this year.
Responding to lawmakers in late April, Kazuo Ueda said that normalization of yield curve control (YCC) policy must be based on a highly defined long-term outlook. This has reinforced the conviction of economists that the Bank of Japan may adjust policy when it publishes its quarterly economic forecasts (July and October).
Currently, the Bank of Japan expects core CPI to rise 1.8% in the fiscal year ending March next year. But economists such as Nobuyasu Atago, former head of the Bank of Japan's price statistics department, said:
"Given that inflation is still high at 3.1% in March, such a low forecast by the Bank of Japan means that inflation must fall below 1.5% in the second half of the fiscal year, but this is very unlikely. We think there may be some policy intent behind this. ”
Although five of the BOJ's nine board members said risks were largely flat and one said risks were on the upside, the BOJ forecasts that risks are diminishing in fiscal 2025. Therefore, the Bank of Japan's risk assessment once again shows that it is downplaying the intensity of inflation in April.
"It's strange that the BOJ's risk assessment is too cautious compared to the view of the balance of risk for board members," Atago said. ”
Amir Anvarzadeh, market strategist at Asymmetric Advisors in Singapore, said:
"Inflation will force the Bank of Japan to extend the YCC range or even cancel the policy. With the current 10-year benchmark yield below the 50 basis point ceiling, it would be desirable to adjust YCC policy now. This will raise interest rates, while banks point to strong domestic and consortium loan demand. ”