BOJ Summary of Opinions: Recent yen weakness reflects inflation, monetary policy differential

The Bank of Japan (BOJ) published the ‘Summary of Opinions' of its October meeting on Monday, with the key takeaways noted below.

“Japan's economy is expected to develop more clearly in the first half of next year, but it must be wary of risks such as persistent supply shortages and an offshore recession.”

“Japan's economy is expected to gradually strengthen as pent-up demand materializes.”

“China's economic development will be closely monitored to see if it will slow further due to supply restrictions and power shortages.”

“Growing energy costs and rising corporate inflation forecasts are anticipated to exacerbate inflationary pressures.”

“The BOJ wants to scrutinize surveys including the December BOJ Tankan report to see whether improvements in corporate funding is broadening.”

“BOJ must maintain an easy monetary policy to help improve the output gap and allow to pass costs on to households more smoothly.”

“The BOJ must communicate clearly it has absolutely no reason to tweak current easy policy as inflation is still short of its target.”

“Recent yen weakness reflects differential in inflation, monetary policy stance between Japan and other countries. “

“Must look at various transmission channels in debating weak yen impact on the economy.”

Market reaction

USD/JPY is shrugging off the upbeat BOJ’s Summary of Opinions, as it advances 0.13% on the day. The spot currently trades at 113.52.

• USD/JPY bulls step in at daily support, sights on monthly resistance