Yahoo Finance BOJ’s Ueda Signals Little Impact of GDP Drop on Policy Path
(Bloomberg) -- Bank of Japan Governor Kazuo Ueda indicated that the economy’s poor start to the year won’t push the central bank from a path of hiking interest rates because a growth rebound is anticipated.
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“There is no change in an overall picture so far” for a recovery, Ueda told reporters Thursday near Stresa, Italy. The economic contraction in the January-March period was primarily caused by a suspension of output and shipments in the car sector, he said, adding that the situation should improve.
Speaking ahead of a meeting of Group of Seven finance chiefs and central bankers, Ueda seized the first opportunity to share his economic views after a government report last week showed gross domestic product shrank more than analysts had anticipated.
His remarks support a view that the BOJ is on track to raise interest rates. Central-bank watchers are increasingly flagging that such a move could come by July — due, in part, to a weakening yen.
Auto production and sales fell after a certification scandal blew up at Daihatsu Motor Co., a subsidiary of Toyota Motor Corp, hitting the whole industry, consumer spending and exports. Japan’s economy shrank by 2% at an annualized quarterly base. It has now failed to register any growth since the second quarter of last year.
While consumer spending dropped for a fourth straight quarter due partly to inflation, Ueda said it should pick up again as wage growth kicks in. In March, Japan’s largest umbrella group of labor unions reported the biggest wage-negotiation win for this year since 1991.
The yen has stayed at a near 34-year low even after suspected government interventions as a wide rate gap remains with the US. That has fueled market speculation that the BOJ could change policy sooner rather than later.
--With assistance from Tom Rees, William Horobin, Jorge Valero, Viktoria Dendrinou and Kamil Kowalcze.
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