Japan manufacturers want BOJ to keep yen stable, survey shows
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[May 20, 2024] By
Leika Kihara
TOKYO (Reuters) -Japan's large manufacturers saw exchange rate stability
as the biggest factor they wanted out of the central bank's monetary
policy, a Bank of Japan survey showed on Monday.
Roughly 70% of firms polled said they experienced drawbacks from the
BOJ's 25-year-long monetary easing measures including a weak yen that
pushed up import costs, the survey showed.
About 90% of the total also saw benefits from the BOJ's prolonged easing
such as low borrowing costs, the poll showed.
The survey, conducted on roughly 2,500 firms nationwide, highlights the
importance Japanese firms place on yen moves in assessing the impact of
monetary policy.
Many firms surveyed also said they were no longer able to hire enough
workers if they kept wage growth low, and saw an economy where wages and
inflation rose in tandem as more favorable than one where wages and
prices barely moved.
"Japan is on the cusp of seeing big changes in corporate behavior," the
BOJ said in the survey conducted as part of a long-term review of the
pros and cons of its past monetary easing steps.
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About 90% of firms said they were more willing to hike wages largely to
address labor shortages, while over 80% said they found it easier than
before to hike prices, the survey showed.
The findings underscore the BOJ's view that rising wages and prices will
keep inflation sustainably around its 2% target, and allow it to raise
interest rates from current near-zero levels.
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The Japanese national flag waves at the Bank of Japan building in
Tokyo, Japan March 18, 2024. REUTERS/Kim Kyung-Hoon/Files
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The BOJ ended eight years of negative interest rates and other
remnants of its radical monetary stimulus in March, making a
historical shift away from decades of ultra-loose policy.
But the decision failed to reverse the yen's declines that have hurt
consumption by pushing up imported goods prices, as markets focused
on the still-large interest rate divergence between Japan and the
United States.
The long-term review was launched by BOJ Governor Kazuo Ueda in
April last year, and looks into the benefits and drawbacks of the
unconventional easing tools the central bank used during its 25-year
battle with deflation.
While the BOJ has said the review won't have a direct impact on
future monetary policy, analysts say the discussions could offer
clues on how soon the central bank would raise rates again and
reduce its huge bond purchases.
Monday's survey, which was part of the review, polled companies on
how they saw their business activities affected by the central
bank's monetary easing measures since the mid-1990s.
The BOJ will also hold on Tuesday a second workshop where its
officials and academics discuss the impact of past monetary easing
steps on the economy and prices.
(Reporting by Leika Kihara; Editing by Jamie Freed, Sam Holmes and
Shri Navaratnam)
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