BOJ policymaker Sato says short-term volatile moves in exchange rate are undesirable
- Weak yen gives boost to exports but also pushes up import prices, leading to lower household income
- FX moves should be determined in a manner that is reflective of fundamentals
- Short-term volatile moves are undesirable
- Will not comment on specific FX levels
- Did not get any specific instruction from Takaichi on policy
- BOJ independence is clearly stipulated by the law
- Monetary policy should focus on inflation
- Fiscal policy should focus on addressing its impact on households, firms
- Hard to conclude whether recent inflation is cost-driven or demand-driven
- Need to watch for both downside risks to growth and upside risks to inflation
- Not easy to guide policy as we are working with an estimate of underlying inflation
As a reminder, Sato is the second policymaker “planted" at the BOJ by Japan prime minister Takaichi. The first was Toichiro Asada, who voted against the rate hike in June. And despite the mixed remarks above, it is clear that Sato will be more than likely favouring a more dovish policy outlook in general. She will be making her debut in the July meeting next month.
Circling back to her comments, the ones on the Japanese yen currency aren’t anything that we haven’t heard of before. So, carry on as you will. As for the others, they also don’t offer too much insight so there really isn’t much to scrutinise from the above besides some added caution on guiding monetary policy.
This article was written by Justin Low at investinglive.com.