Several Japanese central bank policymakers see consumer inflation rising
rapidly towards the 2% target. This is because prices are increasing due to
changes in the pricing behavior of the company.
This can be seen from the income summary at the meeting of the Bank of Japan
(BOJ) board of governors on Wednesday (26/1). However, many board members
stressed the need to maintain an ultra-loose monetary policy to support a
fragile economy facing renewed risks from a surge in Omicron coronavirus
cases.
“There is a possibility that consumer inflation growth year on year could
briefly approach 2%. If that happens, what's important is to look at the
facts behind the gains and whether they are sustainable," said one of the
nine BOJ board members in the summary.
Consumer inflation could temporarily hit levels around 1.5% in the first
half of 2022. According to another board member, the upward momentum will
continue near the BOJ's target will depend on wage and inflation
expectations or the strength of demand.
Read also: Japan's Central Bank remains optimistic that the economy will
recover, business people start to be skeptical
At its January meeting, the BOJ raised its price forecast but said it was in
no rush to change its ultra-loose policy with inflation still far from its
target.
Japan has not been immune to the effects of global commodity inflation with
wholesale prices rising at a record pace.
However, decades of low inflation have led many Japanese companies to be
wary of raising prices for fear of scaring consumers, and have instead
absorbed costs by streamlining operations.
Some BOJ policymakers are seeing signs of change and point to an increasing
number of companies charging consumers higher fees.
"Many companies must now throw away their traditional view that prices will
continue to fall, and change the way they set prices," said a third board.
However, others are skeptical that inflation will continue to rise towards
the BOJ's target. “It will be difficult to hit the BOJ's price target by the
end of fiscal 2023,” the summary quoted one board member as saying.
Japan's core consumer prices rose 0.5% in December from a year earlier, well
below the BOJ's target but hovering around a nearly two-year high in a sign
of widespread inflationary pressure from rising fuel and raw materials
costs.
Some analysts expect consumer inflation to approach 2% when the drag from
cutting cell phone costs ends in April, piling pressure on policymakers to
find ways to boost wages to make up for rising costs of living for
households.
