BOJ dissenter Asada sets bar for supporting next rate hike, wants demand-driven inflation
Asada's comments give the yen little fresh direction, since his message is essentially a conditional one, open to hikes but not committing to a timeline. The reference to a rapid pass-through of higher costs will draw attention from rate traders, as it suggests underlying price pressure is broader than the recent moderation in headline inflation implies. His comments also reinforce the market's base case of an October to December hike, rather than shifting it, since he has left the door open without endorsing near-term action. JGB traders will note his focus on the bond holdings to GDP ratio as a signal that balance sheet policy remains a live and separate lever from the rate path itself.
--- BOJ board member Asada says he needs demand-driven inflation before backing a rate hike, but flags rapid cost pass-through as a risk to watch.
Summary:
- Asada said pass-through of higher costs to prices has been proceeding at a relatively rapid pace
- He said he is not always opposed to rate hikes and will decide based on conditions at the time
- Asada described Japan's neutral rate as rather low, though hard to pin to an exact level
- He said the BOJ should focus on how far the ratio of its bond holdings to GDP should fall
- Asada was hand picked by Prime Minister Sanae Takaichi and was the sole dissenter against June's rate hike
- He called for close coordination between fiscal and monetary policy given the limits of monetary policy alone
Bank of Japan board member Toichiro Asada said he needs to see clear signs of demand driven inflation before he would support further interest rate increases, even as he acknowledged that companies are passing on higher costs to consumers at a relatively rapid pace.
Asada, the sole dissenter against the BOJ's decision in June to raise rates to a 31 year high of 1%, made the remarks in his first interview since joining the board, according to Reuters. He said his dissent stemmed from lingering uncertainty over Middle East developments that could weigh on output and employment, not from opposition to tightening in principle.
The key condition for supporting a future hike, he said, would be confirmation that progress toward the BOJ's 2% inflation target is being driven by endogenous forces such as rising wages and demand, rather than externally driven cost increases. He said those forces are not yet strong enough to justify raising rates, though he stopped short of ruling out future support for tightening, saying he is not always opposed to rate hikes and would base future votes on conditions at the time.
Asada was appointed to the board by Prime Minister Sanae Takaichi, a dovish leader whose picks have been viewed by analysts as an attempt to keep policy loose in support of the government's spending plans. Despite that framing, Asada struck a more balanced tone in his comments, noting that wholesale inflation accelerated in May at its fastest pace in three years as a weak yen and Middle East related fuel costs pushed up import prices.
He also addressed the BOJ's balance sheet, saying the central bank should focus on how far the ratio of its government bond holdings to nominal GDP should decline from its current level of around 80%, adding that once an appropriate level is reached, the balance sheet should grow broadly in line with nominal GDP. On the neutral rate, which he described as the level that neither cools nor overheats the economy, Asada said Japan's is likely rather low, while cautioning that policy should remain anchored to price stability rather than any specific neutral rate target. Most analysts polled by Reuters continue to expect the BOJ's next hike between October and December.
This article was written by Eamonn Sheridan at investinglive.com.提供 MainLink：Investinglive RSS Breaking News Feed
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