Japan's Version of "Jackson Hole Symposium" Held Today: What Topics Will Global Central Bankers Focus On?

Every year, among the global central banks' event calendars, the Jackson Hole Economic Symposium hosted by the US Fed and the Sintra Forum (ECB Forum on Central Banking) hosted by the European Central Bank (ECB) have consistently been the two most closely watched events. However, few may be aware that in Japan, a similar high-profile central banking event is now held annually...

On Tuesday, the two-day annual central banking conference, hosted by the Bank of Japan (BOJ) and its affiliated think tank, commenced at the BOJ headquarters in Tokyo. Despite lacking hiking trails and scenic countryside views, this central banking event is still hailed by industry insiders as Japan's version of the "Jackson Hole Economic Symposium."

Participants include renowned scholars from the US, Europe, and Asia, along with officials from the US Fed, ECB, Bank of Canada, and Reserve Bank of Australia, including the Fed's third-in-command, John C. Williams, President of the Federal Reserve Bank of New York.

Industry insiders suggest that this year's global central banking symposium in Tokyo may focus on two troubling realities: sluggish economic growth and persistent inflation.

Although most speeches are academic in nature and closed to the media, the theme of this year's conference is "New Challenges for Monetary Policy," and these "new challenges" are undoubtedly well-known to insiders:How should central banks respond to stubbornly high inflation, downside economic risks, market volatility, and US tariffs...

These conflicting headwinds are largely caused by the policies of US President Donald Trump, and the uncertainty of the outlook is putting many central banks in a difficult position, regardless of whether they are planning to raise or cut interest rates.

For example, the BOJ, as the "host," is still insisting on continuing to raise interest rates and steadily scaling back its bond-buying program, which stands in stark contrast to other peers globally that are cutting interest rates. However, recent global developments have raised questions about such tightening measures.

What will be discussed at this year's conference?

At last year's conference, participants summarized the gains and losses of responding to economic recessions by discussing lessons learned from using various unconventional monetary easing tools.

The conference also explored whether Japan—the "outlier" that maintained ultra-low interest rates while other major central banks aggressively raised rates—could emerge from decades of deflation and low inflation with the help of nascent and sustained wage growth.

This year, although central bankers' concerns may primarily focus on tariff-induced economic recessions, the conference's agenda indicates that policymakers remain highly sensitive to the risk of falling into a prolonged period of excessively high inflation.

According to the meeting agenda seen by industry insiders, one of the parallel sessions will focus on "reserve requirements, interest rate control, and quantitative tightening."

Another session will discuss a paper published by the International Monetary Fund (IMF) in December last year titled "Monetary Policy and Inflation Scare."

The paper explains how significant supply shocks, such as those caused by the COVID-19 pandemic, can lead to persistent inflation and warns that central banks may face risks if they believe cost-push price pressures can be ignored.

"Better to be 'slow' than to 'make a mistake.'"

This warning holds implications for major central banks currently facing similar dilemmas—a situation exacerbated by global trade wars and Trump's erratic trade policies.

The US Fed was initially expected to implement multiple interest rate cuts this year, but as the risk of inflation rising due to Trump's tariffs intensifies, the Fed has been forced into a wait-and-see mode.

Meanwhile, according to industry insiders' interactions with European Central Bank (ECB) policymakers, although the ECB is expected to cut interest rates again in June, the rationale for pausing action is strengthening as inflation challenges emerge.

"Tariffs may curb inflation in the short term but pose upside risks in the medium term," Isabel Schnabel, an ECB Executive Board member and a prominent hawk, explicitly called for a pause in interest rate cuts at a conference at Stanford University on May 9.

Meanwhile, Japan, currently in a tightening cycle, is also facing the challenge of balancing domestic inflationary pressures with the downside risks to economic growth posed by US tariffs.

Trump's tariffs have forced the Bank of Japan (BOJ) to sharply lower its economic growth forecast on May 1 and hint at a pause in its interest rate hiking cycle—currently, the short-term interest rate remains at a low of 0.5%. Despite this, BOJ Governor Kazuo Ueda has signaled readiness to resume interest rate hikes if underlying inflation continues to stabilize toward the 2% target. Japan's core consumer inflation rate hit a two-year high of 3.5% in April, with food prices surging 7%, indicating the pressure rising living costs are placing on Japanese households.

Nobuyasu Atago, a former BOJ official and now chief economist at Rakuten Securities Economic Research Institute, stated that it is evident that the BOJ has failed to fulfill its mission of price stability. Inflation will remain one of the BOJ's concerns, and the BOJ may already be lagging in addressing domestic price pressures.

As of press time, Kazuo Ueda, Governor of the Bank of Japan, had delivered a keynote speech at the opening event of the annual meeting, stating that the degree of monetary easing would be adjusted as needed. The US dollar fell sharply against the Japanese yen by over 30 pips in the short term.

Subsequently, Agustin Carstens, General Manager of the Bank for International Settlements, was also scheduled to deliver a speech, which investors should continue to monitor.