Tokyo — The Bank of Japan needs to keep monetary policy very loose, as inflation remains much lower than in other economies, said Haruhiko Kuroda, a more hawkish US and European peer. He disregarded the view that he could follow in the footsteps.
Increased inflation risk has led central banks around the world, including the Federal Reserve Board and the Bank of England, to withdraw crisis-mode stimuli and raise interest rates.
Inflation is being curbed in Japan by the delayed recovery of the coronavirus from the pandemic and the persistent deflationary mindset of households and businesses that act on the premise that prices will not rise much, Kuroda said. Told.
“In Japan, nominal wages haven’t risen that much. Unless wages rise in tandem with prices, it’s difficult for inflation to sustainably reach the target of 2%,” Kuroda told Congress on Friday. ..
“It is important to maintain strong monetary easing to support the economy and help generate stable wages and inflation,” he said.
The statement surprised the market with a hawkish shift by allowing the European Central Bank to recognize inflation risk and open the door to the possibility of a rate hike this year, considered in the wake of the stimulus dialback delay. It was done afterwards.
Finance Minister Shunichi Suzuki said in the same parliament that the government wants Japan to work closely with the Bank of Japan to ensure a sustainable exit from deflation.
Kuroda reiterated that he wasn’t in a hurry to follow in the footsteps of other central banks, but market speculation that the Bank of Japan could tighten its policies on Friday was benchmarking 10-year and 5-year Treasury yields. Was pushed up to the highest price in 6 years.
Japan’s core consumer inflation rate remained at 0.5% in December due to slower wage growth and sluggish consumption, the highest level in almost two years, but still well below the BOJ’s 2% target. ..
The Bank of Japan’s Deputy Governor Masazumi Wakatabe said inflation could accelerate to about 1% in the coming months, but it would still be well below 5% in the euro area and 7% in the United States.
Nonetheless, policy shifts by other central banks and rising costs of long-term easing have led some lawmakers to call for the Bank of Japan to regain stimulus, including the huge purchase of exchange-traded funds (ETFs). increase.
Kuroda acknowledged that the BOJ’s purchase of ETFs is an extraordinary measure not found in other central banks, but emphasized that the move is effective in stabilizing the market.
“Buy ETFs only when the market becomes very risk-averse, and refrain from buying them when you don’t need them,” Kuroda said.