Minutes of BoJ’s meeting on March 9 and 10 show a continued commitment to monetary easing, with the aim of achieving price stability in a sustainable and stable manner, accompanied by wage increases. Neverthelesse, a few members noted emerging “positive signs” toward reaching the price stability target, indicating a changing price environment.
With respect to yield curve control, some members emphasized the need to examine the effects of various implemented measures aimed at improving market functioning. They acknowledged that JGB yield curve appeared smoother than before. One member explained that if observed CPI inflation declined and market projections of interest rates calmed down, distortions in the yield curve would likely be corrected.
In terms of the 2% price stability target, several members underscored the importance of maintaining its commitment. One member added that the central bank should anchor inflation expectations to 2% by committing to achieve the target.
Meanwhile, another member expressed concern that discussing the target might lead to “unnecessary speculation” on monetary policy conduct, especially given the growing possibility of achieving the price stability target. This member also argued against revising the joint statement of the government and BoJ.
Japan’s PMI services reaches record high in April, record optimism too
Japan PMI Services rose to 55.4 in April, up from 55.0 in March, marking the eighth consecutive month in growth territory. This represents the highest reading since records began in 2007, surpassing the previous record set in 2013. S&P Global also noted that year-ahead business expectations reached an all-time high, while prices charged increased at the steepest pace in nine years. Meanwhile, the PMI Composite remained unchanged at 52.9, as stronger services growth offset a sharper reduction in manufacturing production.
Tim Moore, Economics Director at S&P Global Market Intelligence attributed the record rise in service sector output to a rebound in demand for face-to-face consumer services, recovery in international tourist arrivals, and improvement in new business from abroad.
Moore also emphasized the high level of business confidence, with around four times as many service providers expecting an increase in activity as those forecasting a decline. This optimism marked the highest level in more than 15 years of data collection.
Furthermore, service providers increasingly passed on higher business expenses to customers to alleviate pressure on margins from rising wages and transportation costs. This resulted in the steepest increase in service sector output charges since the sales tax hike in April 2014.
Full Japan PMI services release here.