THE Bank of Japan must maintain massive monetary stimulus as inflation has yet to sustainably achieve its 2 per cent target, deputy governor Masazumi Wakatabe said on Wednesday, stressing the need to create an environment in which wages can rise faster.
Wakatabe also said monetary policy was not the right tool to deal with Japan’s recent cost-push inflation, which was driven mostly by soaring fuel costs rather than strong demand.
“Since rises in energy and food prices are mainly caused by cost-push factors from abroad, it is desirable to respond to them through measures other than monetary policy,” Wakatabe said in a speech.
“Possible options include fiscal policy and energy policy to reduce Japan’s dependence on petroleum and natural gas,” said Wakatabe, a former academic seen as a proponent of aggressive monetary easing.
Analysts expect rising fuel and raw material costs to keep Japan’s core consumer inflation, which hit 2.1 per cent in April, around the central bank’s 2 per cent target for most of this year.
But Wakatabe said Japan has yet to achieve the BOJ’s price target in a sustainable manner, adding that price rises must be backed by higher wages and heightening inflation expectations.
He also warned of risks to Japan’s economic outlook, such as supply chain disruptions caused by China’s Covid-19 curbs and possible market volatility from US interest rate hikes.
“If risks to the economy materialise, the BOJ must not rule out taking additional monetary easing steps without hesitation,” he said.
Wakatabe voiced doubt the global economy would see a return to an era of sustained, high inflation.
“Leaving other countries aside, my greater concern for Japan, at least for now, is still the continuation of low growth, low interest rates, and low inflation,” he said. REUTERS
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