In its quarterly regional economic report published on Monday, the Bank of Japan (BoJ) maintained an assessment for 8 of Japan’s 9 regions in its latest economic report.
Additional takeaways
BoJ cuts assessment for 1 of Japan’s 9 regions in quarterly report.
BoJ maintains assessment for 8 of Japan’s 9 regions in quarterly report.
All regions said economy recovering moderately, picking up or picking up moderately.
Some regions cited firms saying they might need to curb wage hikes if trade policy, overseas slowdown leads to sharp downgrade in corporate profits.
Others cited firms saying they needed to continue raising wages due to recent price rises, labour shortages and hike in minimum wage.
Some regions said exports, output, capital goods orders were falling due to fading pent-up demand ahead of us tariff implementation.
Many regions said some firms taking tougher price negotiation stance due to hit from tariffs, but not enough to derail pass-through of labour costs.
Many regions said firms maintaining aggressive capex plans but some were putting off, reviewing plans due to trade policy uncertainty.
Many regions said firms continued to pass on rising input, labour and distribution costs via price rises.
Some regions cited firms restraining price hikes as food price rises hit consumers.
Market reaction
At the time of writing, the USD/JPY pair is trading 1.92% higher on the day to trade at 150.35.
Bank of Japan FAQs
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%.
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.
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.
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.
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