BOJ Member Noguchi Calls For Low Rates And Wage Growth
Asahi Noguchi, one of the many board members of the Bank of Japan (BOJ), recently issued a statement about the need for low rates. He added that the policy of low rates would help in wage growth and achieve the 2% inflation target.
Noguchi also said that core consumer inflation would likely fall to 2% or even lower during September or October. The reason behind his statement is the theory that raw material costs will start to dissipate!
When asked about the inflation rising above 2%, he added that it would depend on the services prices and the wages. It is a known fact that Noguchi always favors a super-loose monetary policy to spur economic growth.
Wage Growth Forming A Sustained Trend
The BOJ member added that the core focus of the BOJ should be to ensure wage growth into a strong and sustained trend.
These remarks made by the Noguchi are similar to what other members said on Wednesday. Just a few days ago, Seiji (a board member) also talked about the dangers of backing out from the massive stimulus program suddenly.
It appears that Noguchi is focusing on supporting wage growth in order to hit the target of 2% inflation in Japan. He added that the growth of nominal wages is faster than the 2% target set by the BOJ.
The nominal wages are closely linked to the inflation-adjusted wages which represent the purchasing power of the households. So once the inflation-adjusted are increased, it will lead to more consumer spending.
At the same time, the BOJ has set a target for its YCC at -0.1% along with a 0% yield on its 10-year bond. These measures are taken to reflate the inflation and growth in Japan.
But it appears that the inflation increase is now exceeding the target set by the BOJ. This has led to speculations that YCC tweaking by the BOJ will likely happen to prevent the distortion in the market pricing.