The Bank of Japan must keep monetary policy ultra-loose as inflation remains well below that of the US and Europe due to soft wage growth, BOJ Governor Haruhiko Kuroda said on Friday.
Inflation remains subdued in Japan due to a delay in the economy’s recovery from the coronavirus pandemic, and the public’s sticky deflationary mindset as households and firms act on the assumption that prices won’t rise much, Kuroda said.
“In Japan, nominal wages haven’t risen much. It’s hard to see inflation sustainably reach our 2% target unless wages rise in tandem with prices,” Kuroda told parliament.
“It’s important to maintain powerful monetary easing to support the economy, and help generate steady wage and price growth,” he said.
Mounting inflation risks have prompted central banks across the globe, including the US Federal Reserve and the Bank of England, to withdraw crisis-mode stimulus measures and raise interest rates.
The European Central Bank, considered among laggards in dialling back stimulus, also acknowledged inflation risks and opened the door to a possible rate hike this year.
The BOJ has repeatedly said it was in no rush to follow in the footsteps of other central banks, pointing to the country’s low inflation and wage growth.
Japan’s core consumer prices rose 0.5% in December from a year earlier, the highest level in nearly two years, but still well below the BOJ’s 2% target.
- Reuters, with additional editing by George Russell