TOKYO- Japan’s consumer inflation could briefly approach the central bank’s elusive 2 percent target as geo-political risks push up energy costs, a central banker said on Thursday, in a sign of the broadening fallout from the crisis in Ukraine.
But Bank of Japan (BOJ) board member Junko Nakagawa reiterated the bank’s resolve to keep monetary policy ultra-loose, stressing that wages need to rise in tandem with inflation for such price rises to be sustainable.
“For the time being, inflationary pressure will remain strong, mainly for energy, food and industrial goods,” Nakagawa said in a speech, adding that year-on-year growth in core consumer prices may “briefly rise close to 2 percent.”
“Even if that happens, what’s important is to scrutinize the factors (driving up prices) and whether Japan’s economic fundamentals are strong enough to make such price rises sustainable,” she said.
While soaring raw material costs have pushed up wholesale prices in Japan, core consumer inflation stood at 0.2 percent in January on weak household spending and wage growth.
But many analysts expect core consumer inflation to pace up towards the BOJ’s 2 percent target from next month, as the drag from cellphone fee cuts dissipates and rising oil costs boost gasoline and electricity bills.
More firms appear to be passing on higher raw material and labor costs to consumers, Nakagawa said, adding the BOJ must be mindful of the risk the pass-on could speed up more than initially expected. – Reuters
