Leika Kihara and Tetsushi Kajimoto
TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda said on Tuesday that the central bank will patiently maintain its ultra-loose monetary policy as it is still some way off. Sustainably meeting its 2% inflation target, downplayed expectations for near-term policy changes.
“We expect inflation to moderate significantly below 2 percent by the middle of this fiscal year,” Ueda told parliament.
He added that “inflation is likely to rebound thereafter … although there is considerable uncertainty about the outlook”.
Positive signs include the possibility of a substantial increase in wages at this year’s annual wage talks, which could help shake off Japan’s deflationary mentality.
“(We) will patiently continue monetary easing as we are still far from achieving a sustainable and stable 2 percent. “Price increases and wages continue to rise,” Ueda said, adding that Japan The central bank will also continue its long-term government bond-buying operations for now. Beginning to phase out the stimulus measures of its predecessor to address the growing side effects of long-term easing, such as distortions in market pricing by its massive bond purchases.
These expectations were intensified by a rise in underlying price pressures.
Tokyo’s core consumer inflation, seen as a leading indicator of national trends, slowed in May, but the key index stripping out the impact of fuel hit a flat 40-year high, a sign of price expansion.
The Bank of Japan will make a decision in July 27-28 Policy meeting.
Based on April forecast, BoJ expects core consumer inflation to hit 1.8% in fiscal year ended March 2024, below expectations for a 2.3% poll by the Center for Economic Research in Japan in May .