The Bank of Japan will hold its second monetary policy meeting on the 19th to decide on its immediate policy direction.
Amid a growing view among policy committee members that a virtuous cycle in which both wages and prices rise can be seen, final discussions were held toward a shift in large-scale monetary easing measures, such as lifting the negative interest rate policy. Masu.
Governor Ueda and other nine members of the policy committee exchanged opinions on the latest financial and economic developments, focusing on trends in wages and prices, at a meeting on the 18th, and held a second day meeting on the 19th to discuss the latest financial and economic developments. Decide on the policy management direction.
Some members of the policy committee expressed the cautious opinion that it is necessary to take time to assess the extent to which the movement toward wage increases, including among small and medium-sized enterprises, has spread. We are strengthening our view that we are now in a situation where we can foresee a virtuous cycle of upward growth.
At the meeting on the 19th, after confirming whether it is possible to sustainably achieve the 2% price stability target accompanied by wage increases, discussions will be held toward lifting the negative interest rate policy that has been the pillar of monetary easing measures. We will have a final discussion.
At the same time, the Bank will also consider ending a framework called yield curve control, which suppresses long-term interest rates in addition to short-term interest rates.
If the negative interest rate policy is lifted and interest rates are raised for the first time in 17 years, Japan's monetary policy, which has continued to be unusual even in the world, will undergo a major shift towards normalization.
However, even if the negative interest rate policy is lifted, the Bank will not rush to raise interest rates further and will continue to maintain an accommodative environment for the time being.
The Bank of Japan will announce the decisions made at the meeting around noon on the 19th, and Governor Ueda will hold a press conference in the afternoon to provide an explanation.
Change in monetary easing measures: Impact on daily life and corporate activities
We asked financial analyst Nana Otsuki what kind of impact it would have on people's lives and business activities if the Bank of Japan changed its monetary easing measures, such as by lifting negative interest rates.
Ms. Otsuki
points out four areas where her influence can be felt:
▽Home loans,
▽Deposit interest rates,
▽Yen
exchange rates, and ▽Corporate financing .
Housing loan
Regarding variable type home loans, which are easily affected by short-term interest rates and are said to be chosen by over 70% of users, ``Even if the Bank of Japan raises its policy interest rate, major financial institutions will not immediately I don't think that this will lead to an increase in interest rates on variable mortgage loans.If the policy interest rate rises further from 0%, I think interest rates on variable mortgages will also rise.''
On the other hand, regarding fixed interest rates that are easily affected by long-term interest rates, ``If the Bank of Japan lifts negative interest rates and makes changes to the framework called yield curve control, long-term interest rates may rise. I think the interest rates for people who want to borrow money will go up."
He added, ``I would like people who are borrowing with variable interest rates to take another look at their contracts to find out what their home loan is linked to, especially if they are borrowing with variable interest rates.'' I am.
deposit interest rate
Regarding deposit interest rates, he said, ``In the past, when interest rates were going up and down, it was common for banks to monitor the situation and decide on a response after a lag, but this time they may move relatively quickly.'' I'm talking.
He added, ``Due to demographic changes, some financial institutions, especially in local areas, are seeing a decline in deposits.If the policy interest rate changes, banks that raise deposit rates to a level close to the policy rate at a relatively early stage. It's no surprise that there is an institution," he said.
Yen exchange rate
Regarding the expected movement in the foreign exchange market, Mr. Otsuki said, ``Exchange rates often move based on the difference in interest rates between the other country and the home country, so if the market thinks that Japan's interest rates are going to rise further, it will buy yen. There is a possibility that the movement will become stronger and the yen will appreciate. If the yen continues to appreciate, the prices of imported goods will likely fall, but it is also possible that the amount of foreign currency-denominated assets held will decrease."
corporate financing
Regarding corporate financing, ``Corporate borrowing interest rates are sensitively linked to policy interest rates, so if the policy interest rate rises by 0.1%, borrowing interest rates will also be variable, and companies that are borrowing will have interest rates of 0.1% or higher. There is a possibility that it will go up.''
We also believe that if long-term interest rates rise, fixed borrowing rates may also rise.
On top of that, Mr. Otsuki said, ``If borrowing interest rates rise, there is a risk that it will have a negative impact on corporate investment activities, but there is also an incentive to increase profit margins by changing business formats and innovating.'' ``I think that returning to normal from the abnormal situation of negative interest rates is the first step toward changing the way companies operate.''