Haruhiko Kuroda, the Bank of Japan‘s governor, said on Wednesday that consumer inflation was expected to gradually accelerate on rising energy costs and an expected increase in demand driven by a moderate economic recovery.
The world’s third-largest economy is likely to improve due to robust exports, as well as the boost from ultra-easy monetary policy and the government’s huge stimulus package, Kuroda said.
“Japan’s economy is picking up as a trend, although it remains in a severe state due to the impact of the coronavirus pandemic,” Kuroda said in a speech to a quarterly meeting of the central bank’s regional branch managers.
“The BoJ will scrutinise the pandemic’s impact and won’t hesitate to take additional easing steps as needed,” he said, reiterating the central bank’s resolve to focus on supporting a fragile economic recovery with massive monetary stimulus.
The BoJ will issue later on Wednesday a quarterly report on regional Japanese economies, which will be among factors the central bank will scrutinise at next week’s policy meeting.
The BoJ is expected to slightly upgrade its inflation forecast for the fiscal year beginning in April on rising energy costs, though the new projection will still be below its 2% target.
Japan has not been immune to the impact of global commodity inflation, with wholesale prices in November rising a record 9.0% from a year earlier.
But soft wage growth and consumption have prevented many firms from passing on rising costs to households, keeping core consumer inflation at a more modest 0.5% in November.
- Reuters with additional editing by George Russell