Bank of Japan Governor Nominee Predicts Inflation Rate Will Fall Soon
TOKYO—Japan’s core inflation rate hit a four-decade high of 4.2% in January, but the nominee to lead the Bank of Japan said he expects it to fall and doesn’t think an interest-rate increase is needed.
Core consumer prices—which Japan defines as all prices excluding fresh food—rose at the fastest pace since September 1981 but came in slightly below the consensus forecast. It was the 10th consecutive month that inflation exceeded the Bank of Japan’s 2% target.
On another measure of inflation that excludes fresh food and energy prices, the inflation rate was 3.2% in January.
Kazuo Ueda,
who was nominated by the government this month as the next governor of the Bank of Japan, said Friday he didn’t think the relatively high inflation rate would last, and he said the central bank should continue its loose monetary policy.
“This should be the peak for now,” Mr. Ueda told a parliamentary committee. He said he expects inflation to fall below 2% around the middle of the next fiscal year, which begins in April.
The Nikkei Stock Average closed up 1.3%, helped by the prospect of continued low interest rates under Mr. Ueda. The yen was little changed against the dollar.
Mr. Ueda said he feels the effects of inflation himself because the price of a bento lunch box that he often buys at a convenience store rose to ¥500 from ¥450, equivalent to rising to $3.71 from $3.34.
The BOJ’s monetary policy currently includes a negative short-term interest rate and a cap of 0.5% on the yield of 10-year government bonds, which was raised from 0.25% in December. The low rates are aimed at encouraging borrowing and investment by companies.
Giving his first extended remarks since his nomination, Mr. Ueda said Japan’s price rises were caused by external “cost-push” factors such as higher energy prices. He observed that the pace of increase of import prices has started to slow.
Mr. Ueda, a former economics professor at the University of Tokyo who served on the Bank of Japan’s policy board from 1998 to 2005, was nominated for a five-year term to succeed Gov.
Haruhiko Kuroda,
whose term expires in April.
In his parliamentary testimony, Mr. Ueda said Japan still needed more time to reach sustainable 2% inflation. He said it has made progress under Mr. Kuroda.
“I would like to make these five years a time to carry out the final completion of the mission of achieving stable prices, which has been a project of many years both for the Bank of Japan and for myself,” Mr. Ueda said.
While Mr. Ueda said it is still too early to discuss an exit from monetary easing, he gave some hints as to what he would do if the BOJ were to change its policy—which many analysts expect this year.
“If the achievement of 2% inflation comes in sight, the bank can take a step toward normalizing its monetary policy,” Mr. Ueda said. Options would include raising the interest paid on some reserves that commercial banks hold at the BOJ and targeting the yield of government bonds with a shorter term than the current 10 years, he said.
Mr. Kuroda took office at a time of high expectations for a central banker’s power to lift Japan’s long-sluggish economy, but those expectations have faded. Mr. Ueda said he isn’t a magician who can invent special policies, but a technician with the mission of reading price trends and adjusting interest rates accordingly.
“My biggest mission would be to make such a judgment with no mistakes, depending on economic developments,” he said.
Write to Megumi Fujikawa at [email protected] and Peter Landers at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
TOKYO—Japan’s core inflation rate hit a four-decade high of 4.2% in January, but the nominee to lead the Bank of Japan said he expects it to fall and doesn’t think an interest-rate increase is needed.
Core consumer prices—which Japan defines as all prices excluding fresh food—rose at the fastest pace since September 1981 but came in slightly below the consensus forecast. It was the 10th consecutive month that inflation exceeded the Bank of Japan’s 2% target.
On another measure of inflation that excludes fresh food and energy prices, the inflation rate was 3.2% in January.
Kazuo Ueda,
who was nominated by the government this month as the next governor of the Bank of Japan, said Friday he didn’t think the relatively high inflation rate would last, and he said the central bank should continue its loose monetary policy.
“This should be the peak for now,” Mr. Ueda told a parliamentary committee. He said he expects inflation to fall below 2% around the middle of the next fiscal year, which begins in April.
The Nikkei Stock Average closed up 1.3%, helped by the prospect of continued low interest rates under Mr. Ueda. The yen was little changed against the dollar.
Mr. Ueda said he feels the effects of inflation himself because the price of a bento lunch box that he often buys at a convenience store rose to ¥500 from ¥450, equivalent to rising to $3.71 from $3.34.
The BOJ’s monetary policy currently includes a negative short-term interest rate and a cap of 0.5% on the yield of 10-year government bonds, which was raised from 0.25% in December. The low rates are aimed at encouraging borrowing and investment by companies.
Giving his first extended remarks since his nomination, Mr. Ueda said Japan’s price rises were caused by external “cost-push” factors such as higher energy prices. He observed that the pace of increase of import prices has started to slow.
Mr. Ueda, a former economics professor at the University of Tokyo who served on the Bank of Japan’s policy board from 1998 to 2005, was nominated for a five-year term to succeed Gov.
Haruhiko Kuroda,
whose term expires in April.
In his parliamentary testimony, Mr. Ueda said Japan still needed more time to reach sustainable 2% inflation. He said it has made progress under Mr. Kuroda.
“I would like to make these five years a time to carry out the final completion of the mission of achieving stable prices, which has been a project of many years both for the Bank of Japan and for myself,” Mr. Ueda said.
While Mr. Ueda said it is still too early to discuss an exit from monetary easing, he gave some hints as to what he would do if the BOJ were to change its policy—which many analysts expect this year.
“If the achievement of 2% inflation comes in sight, the bank can take a step toward normalizing its monetary policy,” Mr. Ueda said. Options would include raising the interest paid on some reserves that commercial banks hold at the BOJ and targeting the yield of government bonds with a shorter term than the current 10 years, he said.
Mr. Kuroda took office at a time of high expectations for a central banker’s power to lift Japan’s long-sluggish economy, but those expectations have faded. Mr. Ueda said he isn’t a magician who can invent special policies, but a technician with the mission of reading price trends and adjusting interest rates accordingly.
“My biggest mission would be to make such a judgment with no mistakes, depending on economic developments,” he said.
Write to Megumi Fujikawa at [email protected] and Peter Landers at [email protected]
Copyright ©2022 Dow Jones & Company, Inc. All Rights Reserved. 87990cbe856818d5eddac44c7b1cdeb8
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