TOKYO- Japan has yet to achieve price gains driven by higher wages with the recent rise in inflation driven by cost-push factors, Bank of Japan board member Asahi Noguchi said, suggesting it was premature to retreat from ultra-loose monetary policy.
“It’s true the impact of elevated global inflation is reaching Japan’s economy with consumer inflation exceeding the BOJ’s 2 percent target since the spring of 2022,” Noguchi said, according to the text of his speech posted on the BOJ’s website.
“But the rise (in inflation) is mostly due to cost-push factors amid higher import prices,” contrary to the wage-driven price increases seen in the United States and Europe, he said.
“To achieve our 2 percent inflation target, we must see price rises backed by sustained wage increases,” Noguchi said.
“While annual spring wage negotiations this year achieved wage hikes unseen in 30 years, we’ve only just reached a stage where the possibility of achieving our target has come into sight,” he said.
With inflation exceeding the BOJ’s 2 percent target for more than a year, market expectations are heightening that the central bank will exit ultra-loose monetary policy next year.
BOJ officials, including Governor Kazuo Ueda, have repeatedly stressed the need to maintain ultra-loose policy until sustained achievement of 2 percent inflation, backed by durable wage increases, is in sight.
A key measure of Japan’s trend inflation accelerated to 2.2 percent in October, data released last week showed, marking a fresh record high in a sign of broadening price pressure that heightens the case for the central bank to dial back its massive monetary stimulus.
The data adds to recent growing signs that prospects of sustained wage increases are prodding firms to hike prices for their services, a trend the central bank sees as a prerequisite for ending ultra-low interest rates.
The 2.2 percent year-on-year increase in the weighted median inflation rate, which is closely watched as an indicator on whether price rises are broadening, followed a 2.0 percent gain in September. It was the fastest rise since comparable data became available in 2001.-Reuters
