BoJ’s Noguchi: Depending on data, timing of exit from easy policy could be pushed forward

Bank of Japan (BoJ) board member Asahi Noguchi made some comments on the central bank’s potential exit strategy, noting that they remain data-dependent.

Key quotes

Positive cycle of rising wages and inflation is one important condition for BoJ’s 2% inflation target to be met.

Wages must rise about 3% for BoJ’s 2% inflation target to be met.

We’re seeing early signs of change in Japan public’s norm based on view prices won’t rise much.

Just achieving 3% wage growth once, or a single year, won’t be enough to withdraw stimulus.

Hard to say now in what order boj will tweak tools in event it were to exit easy policy.

Decision on when BoJ will roll back stimulus would be data dependent.

Looking at data, don’t think now conditions will fall into place to exit easy policy any time soon.

BoJ could withdraw stimulus pre-emptively if underlying inflation perks up higher than expected.

Underlying trend inflation has yet to reach 2% but if there is conviction it will reach that level, tweak to easy policy cannot be ruled out.

Momentum toward simultaneous rise in inflation, wages clearly heightening in Japan.

Wage, service prices are among key factors when looking at trend inflation.

If BoJ were to exit easy policy, it must consider various options while looking at appropriate long-term rate target, negative rate and size of its balance sheet.

Market reaction

The Japanese Yen picks up a fresh bid wave and downs USD/JPY toward 136.00 on the hawkish comments from the BoJ policymaker. The major is trading at 136.30, down 1.26% on the day.