"All we need is just a little patience"

I will not be writing on Monday.

I wish I can be as patient as BoJ Governor Kazuo Ueda. On the same day Japan reported its August CPI figure ex food of 3.1% and ex food and energy of 4.3%, about as forecasted while headline rose 3.2%, 2 tenths above the estimate, he held monetary policy unchanged, as expected, and said "We have yet to foresee inflation stably and sustainably achieve our price target. That's why we must patiently maintain ultra loose monetary policy." I guess everyone has their own definition of sustainable, and something the Fed will have to debate soon themselves, but core/core CPI in Japan has now been above 4% for 5 straight months and its been above 2% since October 2022. 

Notwithstanding this, I still believe we are knocking on the door of the BoJ removing itself from the awful policy of negative interest rates as Ueda also said "Having said that, we will of course shift policy if achievement of our target is foreseen." 

The continued fallacy in the thinking of Ueda and is colleagues is embedded in this sentence Ueda gave, "For Japan to stably and sustainably achieve 2% inflation, we need to see strong demand support inflation." The problem here is that higher inflation tempers demand as one's cost of living is not met by a commensurate rise in wages. And this is an aging population where senior citizens don't have the opportunity to have higher wages offset the rise in inflation. Ueda is of course hoping that wages catch up though but even if it does, REAL wages will still see no increase. He said "We need to confirm that a positive wage-inflation cycle has kicked off. This is where we still need time."