Economy
BOJ policymaker calls for keeping low rates, focus on wages
Bank of Japan (BOJ) board member Asahi Noguchi said on Thursday the central bank must maintain ultra-loose monetary policy to ensure wages, seen as key to driving inflation to its 2% target, continue to increase as a trend.
Noguchi said core consumer inflation, which has remained above 2% for more than a year, will likely fall below that level around September or October as the effect of past rises in raw material costs dissipates.
Whether inflation bounces back above 2% and stays above that level will depend on the outlook for wages and services prices, said Noguchi, who is considered an advocate of aggressive monetary easing in the nine-member board.
“What’s most important now is for the BOJ to maintain monetary easing and ensure budding signs of wage growth become a sustained, strong trend,” he said in a speech delivered to business leaders in Naha, southern Japan.
The remarks echo those of fellow board member Seiji Adachi on Wednesday, and underscore the BOJ’s caution over dialing back its massive stimulus programme too hastily.
While firms offered the largest pay hikes in three decades this year, wage rises need to continue for inflation to sustainably hit 2%, Noguchi told a news conference after the meeting with business leaders.
“Nominal wages must rise at a pace faster than the BOJ’s 2% target” for inflation-adjusted real wages to increase, and give households more purchasing power, he added.
Under yield curve control (YCC), the BOJ sets a -0.1% target for short-term interest rates and caps the 10-year bond yield around 0% to reflate growth and inflation.
With inflation exceeding its target, markets are simmering with speculation the BOJ will soon tweak YCC due to criticism the policy is distorting market pricing and crushing financial institutions’ profit margins.
Some market players bet the central bank could widen the allowance band set around the 10-year yield target again, after doing so once in December, if a renewed rise in global long-term interest rates put upward pressure on Japanese yields.
Noguchi, however, said he saw no need to make operational tweaks to YCC for the time being, saying there were no clear distortions in the shape of the yield curve.
The BOJ next meets for a policy meeting on July 27-28, when it releases fresh quarterly growth and inflation forecasts.
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
© Reuters. FILE PHOTO: Workers walk past an under-construction area with completed office towers in the background, in Shenzhen’s Qianhai new district, Guangdong province, China August 25, 2023. REUTERS/David Kirton/File Photo
SHANGHAI (Reuters) – China’s top planning body said on Saturday it had identified a second batch of public investment projects, including flood control and disaster relief programmes, under a bond issuance and investment plan announced in October to boost the economy.
With the latest tranche, China has now earmarked more than 800 billion yuan of its 1 trillion yuan ($140 billion) in additional government bond issuance in the fourth quarter, as it focuses on fiscal steps to shore up the flagging economy.
The National Development and Reform Commission (NDRC) said in a statement on Saturday it had identified 9,600 projects with planned investment of more than 560 billion yuan.
China’s economy, the world’s second largest, is struggling to regain its footing post-COVID-19 as policymakers grapple with tepid consumer demand, weak exports, falling foreign investment and a deepening real estate crisis.
The 1 trillion yuan in additional bond issuance will widen China’s 2023 budget deficit ratio to around 3.8 percent from 3 percent, the state-run Xinhua news agency has said.
“Construction of the projects will improve China’s flood control system, emergency response mechanism and disaster relief capabilities, and better protect people’s lives and property, so it is very significant,” the NDRC said.
The agency said it will coordinate with other government bodies to make sure that funds are allocated speedily for investment and that high standards of quality are maintained in project construction.
($1 = 7.1315 renminbi)
© Reuters. Russian Central Bank Governor Elvira Nabiullina attends a news conference in Moscow, Russia June 14, 2019. REUTERS/Shamil Zhumatov/File Photo
MOSCOW (Reuters) – Russia’s central bank will need two to three months to make sure that inflation is steadily declining before taking any decision on interest rate cuts, the bank’s governor Elvira Nabiullina told RBC media on Sunday.
The central bank raised its key interest rate by 100 basis points to 16% earlier in December, hiking for the fifth consecutive meeting in response to stubborn inflation, and suggested that its tightening cycle was nearly over.
Nabiullina said it was not yet clear when exactly the regulator would start cutting rates, however.
“We really need to make sure that inflation is steadily decreasing, that these are not one-off factors that can affect the rate of price growth in a particular month,” she said.
Nabiullina said the bank was taking into account a wide range of indicators but primarily those that “characterize the stability of inflation”.
“This will take two or three months or more – it depends on how much the wide range of indicators that characterize sustainable inflation declines,” she said.
The bank will next convene to set its benchmark rate on Feb. 16.
The governor also said the bank should have started monetary policy tightening earlier than in July, when it embarked on the rate-hiking cycle.
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