Japan’s central bank chief said on Friday the country will likely reach its key two per cent inflation target as oil rates surge, but the bank will continue monetary easing policies because the price rises are caused by external factors.
The Bank of Japan has struggled to lift inflation for nearly a decade with the world’s third-largest economy swinging between periods of sluggish inflation and deflation, both considered bad for growth.
“Unlike in the US and Europe, inflation is currently at around 0.6 per cent, and is likely to rise to about two per cent after April,” BoJ governor Haruhiko Kuroda told reporters following a two-day policy meeting. “Most of the rise in prices will be caused by increases in international commodity supplies, energy, and food import prices, so naturally it is not necessary or appropriate to tighten monetary policy.”
Most of the rise in prices will be caused by increases in international commodity supplies, energy, and food import prices, so naturally it is not necessary or appropriate to tighten monetary policy- Bank of Japan governor Haruhiko Kuroda
The United States Federal Reserve raised its benchmark interest rate on Wednesday for the first time since 2018 in a bid to tackle soaring inflation.
Kuroda said consumption in Japan is expected to further recover from a pandemic dip as the government lifts restrictions – which mainly require restaurants and bars to limit opening hours – in Tokyo and elsewhere on Monday.
Japan’s core consumer prices, which exclude volatile fresh food, rose 0.6 per cent in February from a year earlier, government data showed on Friday. The internal affairs ministry said the rise was driven by food prices and utility bills due to a surge in energy costs linked to the Ukraine crisis. It met market expectations as the sixth straight monthly gain, and the sharpest rise since February 2020.
The BoJ’s target of sustained two per cent inflation is seen as key to spurring healthy economic growth in Japan. But analysts say that even if the target is hit in the coming months, it is unlikely to last.
“Once the energy price shock and deterioration in terms of trade is gone, prices will decline again,” Shigeto Nagai of Oxford Economics told AFP ahead of the BoJ meeting.
Excluding energy prices as well as fresh food, Japan’s consumer prices were down 1.0 per cent in February, the 11th straight monthly fall, the ministry said.