BOJ governor Ueda says will place larger focus on inflation in making policy decisions

It may not seem like it, but the headline remark is arguably the key takeaway from his press conference so far.

I mean, he was not expected to be explicit about taking action to defend the sliding Japanese yen currency. But at the balance, he’s reflecting no urgency to participate in this matter and leaving it to the Ministry of Finance to have to handle the situation – at least for now.

Ueda is going as far to state that the BOJ is waiting on the wings because of inflation developments, pointing out that:

• On average, there is still some distance to the 2% inflation target
• Compared to October, likelihood of achieving 2% target is heightening
• But compared to December, the likelihood is not all too different
• We are hearing more voices that price hikes are reflecting wage growth
• Paying attention to price changes in April but that will just be one factor in deciding policy

The messaging in his press conference today is really about reading between the lines. And so far, it suggests that the BOJ has not reached the pain threshold to have to do something about the decline in the currency. However, they appear to be already unsettled by the happenings in the bond market for the time being.

In any case, addressing the latter should also help out with the former somewhat. So, I guess they will take a gander with that approach first before really needing to throw the kitchen sink to address any further freefall in the yen.