Strategist Believes BOJ Is Wrong about Inflation

Strategists from CLSA Japan believed that the Bank of Japan has been “wrong-footed” on inflation, saying that the central bank has been listening to the U.S. Fed about inflation being transitory too much. 

Nicholas Smith, a strategist from CLSA Japan, said that the bank forecast this year’s inflation to average at 1.8%, when in reality it was above 2% for 15 months now. 

Japan’s core consumer inflation rate accelerated again in June and remained above the central bank’s 2% target for the fifteenth consecutive month, according to data released on Friday, building to recent indications of expanding price pressures.

Consistent with the forecasts of the experts polled by Reuters, the core consumer inflation index increased 3.3% year-over-year in June. This was somewhat higher than the 3.2% increase seen in May.

Kazuo Ueda, governor of the Bank of Japan, recently gave a signal that the central bank might keep its ultra-loose monetary policy in place for the time being, telling Reuters, “there was still some distance to sustainably and stably achieving the central bank’s 2% inflation target.”


Meanwhile, Barclays economist Tetsufumi Yamakawa added that the majority of the market still appears to believe that inflation in Japan is transitory, attributing it to a cost push instead of a demand pull.


The BOJ has yet to make its first move on the yield curve control policy (YCC) and policy rate despite the central bank’s governor Kazuo Ueda saying countless times that the central bank will make it move at the right time.