The Bank of Japan’s interest rate hike to 0.5% last week came as no surprise — some board members had hinted at it beforehand. The central bank's communication strategy often comes across as less clear compared to the U.S. Federal Reserve.
While it is clear that Gov. Kazuo Ueda makes efforts to explain his thinking at news conferences, many viewers may still find it difficult to fully grasp the central bank's position. Many companies, particularly small- and medium-sized businesses, are struggling with soaring raw material costs and weak domestic demand. Consumers, too, are feeling the pinch of rising prices, with stagnant wages leaving them without a sense of increased purchasing power, resulting in sluggish consumption.
Such realities suggest widespread discomfort with the BOJ’s eagerness in suggesting that economic and price outlooks are on track, a virtuous wage-price cycle is emerging and that further rate hikes are likely.
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