Bank of Japan board member Junko Koeda said policy debate is centred on upside price risks tied to yen depreciation, strong global AI demand and spillovers from the Middle East. She said the central bank should adjust the policy rate in a timely way in line with economic and price conditions, while keeping its estimated neutral rate range in view. Koeda said attention should extend to both AI-related exports and imports, and to whether AI-driven investment can ease labour shortages and lift productivity, while assessing how rate changes pass through to financial conditions, activity and prices.
Japan’s Financial Conditions And Policy Outlook
Koeda said Japan’s financial conditions remain accommodative and corporate financing conditions are generally favourable, while recent rate rises are not necessarily expected to curb consumption by the working generation; she wants to examine the accumulated effects on households. She put the neutral interest rate well above 1% and said shifts in central bank government bond holdings may have a smaller effect on long-term yields during balance-sheet reduction than during active expansion. She said underlying inflation has been about 2% over the past year or so, with CPI price distribution pointing to inflation anchored around 2% as wages rise. USD/JPY was down 0.45% at 157.60.
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