Business & Economy

Japan central bank says economy in ‘critical phase’ for price stability

Tokyo, Dec 28 (EFE).- Japan is in a “critical phase” for achieving the desired price stability target of two percent, and “continuing with monetary easing” is necessary, according to the Bank of Japan (BOJ) Wednesday.

The BOJ statement came after its meeting held on Dec.19 and 20, during which board members underlined the detection of signs of a “virtuous cycle,” in the backdrop of its flexibility plan started a decade ago.

The cycle implies that an increase in corporate profits would result in consistent salary hikes, which would be favorable for its currently tight labor market.

However, board members pointed out that the objective was yet to be met and it was necessary to maintain its monetary easing and yield curve control.

In its meeting the previous week, the BOJ decided to maintain its low interest rates and the aim of keeping long term government bonds at around zero percent, but expanded the price range for these assets, which some interpret as a step towards exiting monetary easing.

However, some board members dismissed this possibility, specifying that “the expansion of the range of 10-year JGB (Japanese Government Bond) yield fluctuations from the target level is not intended to change the direction of monetary easing.”

“It is a policy measure to make the current monetary easing – which is conducted with the aim of achieving the price stability target of 2 percent – more sustainable amid global inflation through improvement in the functioning of bond markets,” according to the board members.

Furthermore, the members highlighted that “the functioning of bond markets has deteriorated” and that it could affect the financial reports and complicate the achievement of the desired two percent inflation.

Japan has been recording price hikes beyond three percent in the past few months – well below the high inflation that many big economies are facing – and the BOJ considers that these are circumstantial Consumer Price Index increases due to the rise in energy and raw material prices globally. EFE


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