A man walks through the headquarters of the Bank of Japan in Tokyo, Japan, January 18, 2023. REUTERS/Ise Kato/File photo Obtain licensing rights
Kushiro, Japan (Reuters) – Japan’s central bank board member Naoki Tamura said on Wednesday that after a decade of massive monetary stimulus, inflation in Japan is “clearly close” to the central bank’s target, indicating conditions needed to phase out policy. excessive facilitation. May meet early next year.
While markets consider Tamura to be a hawk on the BOJ’s nine-member board, his comments suggest that discussions about the timing of unwinding the BOJ’s radical stimulus will intensify in the coming months.
Although inflation is already exceeding its 2% target, the Bank of Japan has pledged to keep interest rates very low until there is more evidence that this level can be maintained.
Tamura said there was a good chance inflation would beat expectations as companies shed their aversion to raising prices and wages.
“It has been about a decade since the Bank of Japan began its efforts to achieve the 2% inflation target in a sustainable and stable manner,” he said in a speech to business leaders in northern Japan. “I feel that achieving this target is now clearly on the horizon.”
The former commercial banker said that for the time being, the BoJ should maintain monetary easing to check wage and price developments.
“But I hope that from January to March next year, we will have more clarity” about whether Japan can sustainably meet the bank’s inflation target from available wage and price data by then, he said.
Tamura’s comments follow those of Governor Kazuo Ueda, who said last week that core inflation in Japan “remains slightly below our target”.
Under former Governor Haruhiko Kuroda, the Bank of Japan deployed a massive program of asset purchases in 2013 to end deflation and prop up inflation to its 2% inflation target. After that goal proved elusive, the bank adopted Yield Curve Control (YCC) in 2016 – a policy that caps 10-year yields at around 0%.
Since then, the BoJ’s focus has been on managing YCC side effects such as market distortions caused by its heavy intervention in the bond market. Last month, the bank took steps to allow the yield on 10-year notes to rise further, reflecting rising inflation.
Tamura said Japan’s long-term interest rates are likely to be driven more by market forces after the Bank of Japan’s decision in July.
He added that the Bank of Japan would rein in excessive rises in long-term yields, such as increased bond buying, to counter “speculative movements that deviate from fundamentals.”
Core consumer inflation in Japan remained above the central bank’s 2% target in June for the 15th consecutive month, as companies continued to pass higher import costs on to households.
Governor Ueda stressed the need to maintain a highly accommodative policy so that inflation is further driven by strong domestic demand accompanied by sustained wage growth.
(Reporting by Laika Kihara) Editing by Muralikumar Anantharaman and Sam Holmes
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