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BANK of Japan Governor Kazuo Ueda said yesterday the central bank expects underlying inflation to stay around its 2 per cent target but recognises there are ‘some upside risks.’
The rise in prices of energy-related products was beginning to hit consumer inflation with price growth seen accelerating further into early next year, Ueda said.
“We are in an equilibrium with wages growing at a level consistent with 2pc inflation,” Ueda said at a seminar hosted by the International Monetary Fund.
But the BOJ’s 2pc inflation has yet to become a social norm in Japan, Ueda said, adding that the central bank’s goal now was to anchor underlying inflation around its target.
He also said the BOJ was looking at the actions of other central banks “very, very carefully,” as they affect asset prices including foreign exchange rates and interest rates.
“What they do reveals important information about what they think about their economies, which will impact our economy. So we look at their behaviour and actions very carefully,” he said on the policy measures of other central banks.
On unconventional monetary policy tools, Ueda said they have had some positive effects when the BOJ deployed them, but added they have not been perfect substitutes for cutting interest rates from positive territory.
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