BoJ’s Himino: Financial and capital markets continue to be unstable.

Key Quotes:

• "The financial and capital markets remain unstable."

• "The BoJ needs to monitor these developments with utmost vigilance."

• "The BoJ intends to carefully examine the impact of these market developments, both domestically and internationally, on economic activity, prices, the risks surrounding the outlook, and the degree of confidence in that outlook."

• "The BoJ will adjust its level of monetary accommodation if it gains increasing confidence that its economic and price forecasts will materialize."

• "Monetary policy will be conducted appropriately to achieve the 2% inflation target in a sustainable and stable manner, while maintaining close communication with market participants and other stakeholders."

• "The BoJ must closely monitor recent market volatilities, including weaker stocks and a stronger Yen."

• "The BoJ should continue refining its methods for estimating Japan's neutral interest rate and use these estimates as a useful reference point."

• "However, the BoJ must chart a path forward by assessing how the economy and prices respond to its monetary policy actions."

• "Estimating the neutral interest rate does not automatically indicate the correct policy path for Japan, at least for the moment."

• "Our baseline scenario for fiscal years 2025 and 2026 envisions a reasonably balanced state, where inflation aligns with the price stability target and economic growth slightly exceeds its trend rate."

• "The recent appreciation of the Yen may help mitigate the increase in import costs and profit squeezes faced by many small and medium-sized firms."

• "Yet, a stronger Yen could reduce Yen-denominated profits for export industries and Japanese multinationals."

Market reaction

USD/JPY continues its recovery, gaining 0.35% on the day to trade near 144.50, as comments from Himino hit the wires again.