I wanted to give you a general analysis comment on the Fed members’ comments, but right now, the Bank of Japan is more important. Personally, I thought the Bank of Japan would move in April, but it seems quite likely that there will be some signal of austerity at the BOK Financial Policy Committee in March, scheduled for the 19th. Let’s talk about that.

First of all, if you look at the recent news flow in Japan, you can see that the Japanese authorities are under considerable pressure due to the yen’s inability to easily change its strength despite the yen’s three-time upward revision of the YCC, which has been pushed back to 150 yen per dollar. Further weakening of the yen gives significant power to exporting companies. And despite the improved performance of exporting companies, the yen-denominated stock price can look quite cheap to blue-eyed foreigners… The yen is showing signs of being very weak… Stock prices can be stimulated, but the problem is that this is not helping domestic consumption very much. In fact, it hasn’t been long since Japanese investment has flowed into the Japanese stock market with the introduction of NISA, etc. The Japanese stock price has risen from the bottom 7,000 to the present, but it was only recently that Japanese investment has strengthened. Then, it can be said that it is difficult for the working class in Japan to benefit from rising asset prices.

The weak yen has the effect of stimulating import prices. Import prices touch Japan’s own prices, and Japanese companies, which had difficulty in raising wages due to prolonged deflation, should now consider wage hikes. Only when wages rise can consumption be maintained and thus can it emerge from the deflationary swamp, which can be a mid- to long-term growth engine for companies. The government also thinks the same. For your information, the approval rating of the Kishida Cabinet is currently at a disastrous level. The stock price is good, exports are good, and the yen is weak. However, domestic demand does not clearly feel these benefits, making it difficult for the Cabinet to receive support from the working class. From the perspective of the Kishida Cabinet, as there is an election this year, it is likely that the Kishida Cabinet is considering more aggressive measures to control inflation, which is eating up Kishida’s approval rating.

The Japanese economy is now moving toward inflation, free from deflation. Unlimited quantitative easing. It was pulled out of the deflationary swamp by very strong forces. Of course, escape is a celebration, but when you move on to inflation. If you splash out on excessive inflation, that could be another problem. Now we need to curb inflation so that it doesn’t jump out too much. One of the main ways to do this is to tighten monetary policy, like abolishing negative interest rates. We need to abolish negative interest rates and change monetary easing to some extent, so that we can weaken the yen and curb inflation. It is said that it will have a significant impact on the future of the Kishida Cabinet… Not only the Bank of Japan, but also the government of Japan will have to pay attention.

And one more thing… The Bank of Japan introduced negative interest rates on January 29, 2016. If you abolish it… in fact, it will be the first negative interest rate abolition in eight years. If you abolish the YCC… Since the YCC was introduced in September 2016, it will be the first YCC abolition in seven and a half years. If you walk without crutches after eight years, you will stumble. Yes, I’m sure there will be side effects on financial markets. A case in point is the strong yen. The weak yen is burdensome, but the strong yen will also be fearful for the Bank of Japan, where the remnants of deflation remain. Then wouldn’t you want a modest yen strengthening? The Bank of Japan raising interest rates or abolishing the YCC refers to austerity. But what happens if the Bank of Japan makes a change when there is a rate cut in the United States? One side will lower interest rates and the other will raise interest rates. Wouldn’t the impact on the exchange rate be much greater? As there is still time left until the US interest rate change… We will need to move quickly before then. So after the January financial policy meeting, a member of the Bank of Japan said that now was the best time to abolish negative interest rates.

Still, there will be things that will hold you back. It’s still hard to tell if you’ve completely escaped deflation. … As Japan’s economic growth has recently contracted mainly on consumption, there is also a renewed pressure on tightening. However, reflecting the recent inflation, Japanese companies are now aggressive in raising wages. I think we’ll be able to find out about this outline by the 15th or so. By the way, you don’t have to go until that day to get a rough idea of the atmosphere. Let’s look at the title of the article.

“Kishida, coordinating the hosting of the ‘Labor-Management Meeting’ on the 13th.. Emphasis on continuous wage hikes” (News 1, 24. 3. 5)

“Large Japanese conglomerates ‘will raise wages significantly’… Supporting the aspect of escaping deflation” (Herald Economy, March 4)

“Japan’s labor union demands the highest wage increase in 30 years” (Global Economic, 24.3.7)

“The union demands the largest wage increase in 30 years to revive the economy” (Dong-A Ilbo, March 8)

In March, the labor union demanded a 5.85% wage increase in the Spring Investment in Japan. It’s the highest level in 30 years. Japan’s prices are now around 2 to 3 percent. If you raise the price by 5.8 percent, it gives the Japanese an income that goes beyond the price. The increase in wages leads to intrinsic inflation. If the trend of inflation is predictable enough, the Bank of Japan will not have a reason to wait any longer. So there’s talk about this. This article is very important. Read it carefully. We’ll explain each paragraph.

“According to major foreign media such as Dow Jones on the 7th, BOJ Governor Kazuo Ueda attended the Senate (Senate) Budget Committee and said, “We can tighten monetary policy by raising interest rates on excess reserves.”

Payment reserve (reserve) means that commercial banks deposit a certain portion of their deposits at the central bank to respond to customers’ requests for withdrawal of funds. If you deposit more than the set reserve ratio, you become an excess reserve. This excess reserve becomes a deposit from the standpoint of the central bank. Interest must be paid at a set interest rate, and raising this interest rate weakens the incentive for banks to send funds to the market. It suggested another means of monetary tightening. (Intermediate)

On the same day, Ueda also mentioned the end of the Yield Curve Control (YCC) policy. However, he also hinted at a plan to prepare for the situation in which the Tokyo bond market reacts excessively due to the tightening transition. “We will ensure that there is no discontinuity before and after the policy revision,” he said. “Even if the YCC ends, we will continue to buy government bonds.”

“I don’t think it’s a hindrance to implementing the necessary policies in consideration of the BOK’s finances,” he added. Market participants are raising expectations that the BOK will come up with a policy of tightening in some way this month. The BOK’s next meeting is March 19.” (Yonhap Infomax, 24.3.7)

The first paragraph says that we can tighten by raising the excess reserve interest rate. The excess reserve interest rate? Let’s take a look at it for a moment. When commercial banks receive deposits, they have to deposit a portion of them as reserves in the central bank. That’s stipulated by law. This is called the statutory reserve. Stacking up more money beyond that statutory reserve. This is called the overpayment reserve. On January 29, 2016, when the Bank of Japan introduced negative interest rates … it didn’t charge negative interest rates on statutory reserve. Negative interest rates are the concept of deposit, you pay a storage fee. The law makes you deposit money … and forces you to pay interest by hitting negative interest rates on it?? This is a little bit… Isn’t that too much?

But overpayment reserves are different, even though the Bank of Japan has been supplying money through quantitative easing, etc., commercial banks don’t lend as much as they would have been in the past, and they keep stacking it up in the Bank of Japan, where there’s a lot more overpayment reserves than there are legal reserves, and that’s why the Bank of Japan, which got mad looking at this, was saying in January 2016 that I’m going to hit the overpayment reserves in negative terms of -0.1% of the time. So if the commercial banks don’t lend, and they pile more money in the central bank, then they’re going to hit negative interest rates as a penalty for that, and then they’re going to have to give you a loan to make you cry…

Well, now the Japanese economy is pretty much at a loose end, and you’re seeing inflation, not deflation, and people’s consumption is going to increase, and Japanese companies are going to invest in facilities in anticipation of an economic recovery. And commercial banks in Japan are going to be able to ramp up lending wildly, because it could actually hit negative interest rates. The problem of overstretching lending is the creation of a stimulus. And that could make Japan’s inflation even stronger. And that’s why they’re going to raise the interest rate on their reserves to zero percent, which is now at minus 0.1 percent, so they’re going to abolish negative interest rates. And with that background in mind, let’s read the second paragraph. I’m kind enough to quote you again.

“Payment reserves (reserves) mean that commercial banks deposit a certain portion of their deposits at the central bank to respond to customers’ demand for withdrawal of funds. If you deposit more than the set reserve ratio, you become an excess reserve. This excess reserve becomes a deposit from the central bank’s point of view. Interest must be paid at a set interest rate, but raising this interest rate weakens the incentive for banks to send funds to the market. It presented another means of monetary tightening.”

You get it, right? Now we’re going to the third paragraph, where we’re talking about abolishing YCC, which is a very short-term increase in interest rates. YCC is pushing Japan’s 10-year Treasury bond rate to not rise above a certain interest rate. Let’s take a moment to explain the background.

Under Abenomics, the Bank of Japan has strengthened quantitative easing since 2012. Every month, it purchased 800 billion yen of Japanese government bonds. By buying 800 billion yen of government bonds every month, it will supply the quantity of money in line with 800 billion yen. The supply of yen will be targeted at quantity. On the other hand, YCC has more than 1 percent, or 1 percent