Ueda said the pass-through of rising import prices must dissipate and that wages and inflation needed to rise in tandem for the BoJ to consider exiting ultra-easy policy. — Reuters
TOKYO: Bank of Japan (BoJ) governor Kazuo Ueda says the central bank does not necessarily need to wait until inflation-adjusted wage growth turns positive before it ends ultra-loose monetary policy.
“Real wages would likely have turned positive when a positive wage-inflation cycle kicks off,” Ueda said.
“But in terms of how long we maintain our massive monetary easing – real wages don’t necessarily have to turn positive before that decision is made,” he said.
“The decision of ending ultra-loose policy could be made if we can foresee with some certainty that real wages will turn positive ahead,” Ueda told parliament.
Ueda said the pass-through of rising import prices must dissipate and that wages and inflation needed to rise in tandem for the BoJ to consider exiting ultra-easy policy.
Analysts expect Japan’s inflation-adjusted real wages, which slipped in September for an 18th month, to continue falling well into next year as wage hikes fail to catch up with persistent price rises.
The BoJ currently sets a 0% target for the 10-year bond yield under a policy called yield curve control and guides short-term interest rates at minus 0.1% to reflate growth and sustainably achieve its 2% inflation target.
Ueda stressed anew the BoJ’s resolve to keep ultra-loose policy until the recent cost-push inflation shifts into price rises driven more by robust domestic demand and higher wages.
“When looking at trend inflation, there’s still some distance towards our 2% target. That is why we are continuing with massive easing,” Ueda said.
Japan’s core consumer inflation hit 2.8% in September, remaining above the BoJ’s target but slowing below the 3% threshold for the first time in over a year as the effect of past surges in global commodity prices dissipated.
In estimates made last month, the BoJ revised up its price forecasts to project core consumer inflation hitting 2.8% this year and next, but slowing to below 2% in 2025.
Ueda also said volatile currency moves were among the side effects the central bank was scrutinising in maintaining its bond yield control policy.
“If yield curve control heightens market volatility, that is seen as among side-effects of the policy,” Ueda said, when asked by an opposition lawmaker whether he saw sharp yen falls as a side effect of the BoJ’s ultra-loose monetary policy. — Reuters
