TOKYO, Feb 22 — The Bank of Japan (BOJ) must maintain its ultra-loose monetary policy to allow time to see whether the recent rise in inflation will be accompanied by higher wages, its board member Naoki Tamura said on Wednesday.
A former commercial banker, Tamura repeated his view that the central bank must at some point conduct a comprehensive assessment of its monetary policy framework by weighing the benefits of costs of current ultra-loose policy.
He also warned that Japan’s inflation could overshoot initial forecasts, with services prices perking up and a growing number of companies passing on rising raw material costs to households.
But Japan is now experiencing a “rare” environment in which pent-up demand, driven by huge household savings accumulated during the Covid-19 pandemic, is underpinning the economy even as rising import costs push up inflation, he said in a speech.
“We’re now in a phase where we need to scrutinise whether Japan can achieve a positive wage-inflation cycle. As such, it’s appropriate to maintain monetary easing for now,” Tamura said.
The remarks came amid heightening market expectations that recent rises in inflation will prod the BOJ to end its yield curve control (YCC) policy and begin hiking interest rates when dovish incumbent Governor Haruhiko Kuroda’s term ends in April.
— Reuters
