BOJ Keeps Options Open by Citing Dual Risks in Regional Reports

Article content(Bloomberg) — The Bank of Japan avoided fueling market expectations over the likelihood of a rate hike this month by keeping its signaling from two quarterly regional economic reports highly nuanced.Sign In or Create an AccountEmail AddressContinueor View more offersArticle contentThe BOJ left the economic assessments of all nine regions unchanged in its Sakura report Monday, saying the respective economies are either recovering or picking up. At the same time, the BOJ said there is emerging cautiousness in the areas over the ramifications of the war in the Middle East.Article contentWe apologize, but this video has failed to load.Try refreshing your browser, ortap here to see other videos from our team.Article contentArticle content“Looking ahead, amid increasing uncertainty, concerns have been expressed about rising prices, particularly for energy, and their negative effects on corporate profits and private consumption,” the BOJ said in a separate release summarizing the views of branch managers.Article contentTop StoriesGet the latest headlines, breaking news and columns.There was an error, please provide a valid email address.Sign UpBy signing up you consent to receive the above newsletter from Postmedia Network Inc.Thanks for signing up!A welcome email is on its way. If you don't see it, please check your junk folder.The next issue of Top Stories will soon be in your inbox.We encountered an issue signing you up. Please try againInterested in more newsletters? Browse here.Article contentThe commentary suggests the central bank doesn’t want to paint itself into a corner three weeks ahead of its next decision on April 28. As of Monday, traders see a roughly 66% chance of a rate hike this month, according to pricing in the overnight swaps market, as the war in Iran could raise upside inflation risks for the resource-poor nation at a time when inflation has stayed mostly elevated. Article content“Regarding pricing, many reports indicated that firms continue to pass on rising costs, such as labor and logistics expenses, to selling prices,” the BOJ said in the report. “Companies in materials-related industries reported that, due to the recent depreciation of the yen and the surge in oil prices, there are voices indicating plans to announce or consider further price increases going forward.”Article contentAt the same time, the report also noted continued efforts to respond to consumers’ inflation fatigue by limiting the extent of price hikes and strengthening the lineup of lower-priced products. Article contentArticle contentGovernor Kazuo Ueda has repeatedly highlighted the importance of broadening wage hikes supporting sustained inflation as a condition before it can continue to raise borrowing costs. The regional report indicated that wage trends were developing in line with the BOJ’s outlook — at least before the Middle East conflict escalated.Article content“Many small and medium-sized enterprises in the regions are also planning wage increases for fiscal 2026 at roughly the same level as in fiscal 2025, from the perspective of securing and retaining workers,” the BOJ said. The fiscal 2025 pay negotiations resulted in the most generous wage increases in more than three decades.Article contentJapan is among the economies most vulnerable to the market ructions stemming from the Middle East conflict, as it imports almost all of its oil, with most of it coming from that region. Oil steadied Monday as traders tracked reports of a push for a ceasefire. Still, the price has risen roughly 70% compared with where it was before the onset of hostilities.Article contentThat raises a risk of fueling a resurgence in inflation after it stayed above the BOJ’s 2% target for four years through 2025. With businesses more active about passing on rising input costs to customers via price hikes, the BOJ has pledged to watch both upside and downside inflation risks.Article contentThe yen was mostly steady following the reports, trading near the key threshold of 160 per dollar, close to the level where authorities last intervened to support Japan’s currency in 2024.Article contentTrending U.S. within 'weeks' of oil shortages if war in Iran continues: Eric Nuttall Oil & Gas CRA denied taxpayer with multiple health issues the disability tax credit Personal Finance Why rate watchers shouldn't take the Bank of Canada at its word Mortgages Canada's $150-billion challenge: How to build a homegrown defence sector and fast Economy The worst is yet to come for fuel prices: FP Video News Share this article in your social networkCommentsYou must be logged in to join the discussion or read more comments.Create an AccountSign in Join the Conversation Postmedia is committed to maintaining a lively but civil forum for discussion. Please keep comments relevant and respectful. Comments may take up to an hour to appear on the site. You will receive an email if there is a reply to your comment, an update to a thread you follow or if a user you follow comments. Visit our Community Guidelines for more information. U.S. within 'weeks' of oil shortages if war in Iran continues: Eric Nuttall Oil & Gas CRA denied taxpayer with multiple health issues the disability tax credit Personal Finance Why rate watchers shouldn't take the Bank of Canada at its word Mortgages Canada's $150-billion challenge: How to build a homegrown defence sector and fast Economy The worst is yet to come for fuel prices: FP Video News