In Rare 6-3 Vote, BOJ Delays Interest Rate Hike Again

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Source: https://www.boj.or.jp/en/research/research_data/cpi/cpirev.xlsx Note: This shows the gap between prices at the cash register and what prices would have been if the government had not put additional subsidies on food and energy; 96% in parentheses means this measure covers 96% of the household budgetKey Points:The BOJ now forecasts that, due to the Iran war, GDP growth this year will slow to just 0.5%, half the pace predicted in the January forecastMeanwhile, while headline inflation aside from fresh food will rise to 2.8%, almost 1 percentage point above the January forecast of 1.9%On a divided 6-3 vote—a rarity—the Bank of Japan (BOJ) says it will wait and see before raising rates to 1%; I will discuss the wisdom of that decisionI’ll assess the claim from some critics that pressure from the Takaichi administration blocked the BOJWith the war exacerbating stagflation— rising prices and slowing growth—it’s unclear whether inflation or stagnation is the greater threatI will look at the BOJ’s estimate of “hidden inflation,” the gap between prices that customers see and what prices would have been if not for additional government subsidies on food and energyUnfortunately, BOJ Policy Board keeps refusing to discuss—or perhaps even see—one of the biggest threats to its rosy scenario: falling real wages.The memo below is available only to paid subscribers. Free subscribers can get instant access to the full text of this and all future Memos by subscribing for $50 per year. If you only want this Memo, you can subscribe for a month for $5, get the Memo, and then cancel. You …