Bank of Japan Governor Kazuo Ueda said on Friday the BOJ will not budge from its stance of keeping ultra-loose monetary policy despite “extremely high” uncertainty over the economy’s future.
Official statistics released on Friday showed that Japan’s core inflation picked up speed again in April, rising 3.4% year over year. This throws doubt on the central bank’s prediction that inflation will decelerate back below its 2% target later this year as cost pressures abate.
Ueda argued that the recent spike in inflation beyond the BOJ’s 2% target was driven largely by external, cost-push forces rather than by robust domestic demand, and that a response to such price increases through tighter monetary policy would be detrimental to the economy.
Analysts predict inflation will remain above the Bank of Japan’s 2% target for a longer than expected due to the April rise.
According to a Reuters report, the BOJ Governor stated, “At the present time, it is necessary to continue with monetary easing,” as Japan’s economy is vulnerable due to slowing global growth and doubts about the sustainability of wage increases.
Ueda said that there was a high price to pay for trying to achieve inflation of 2% too soon by changing the policies that had been in place. “It’s appropriate to take time judging (when to) tweak ultra-easy policy toward a future exit.”
