TOKYO — Bank of Japan (BOJ) Governor Haruhiko Kuroda on Monday brushed aside the chance of a near-term exit from ultra-loose monetary policy but voiced hope that intensifying labor shortages will prod firms to raise wages.
Kuroda said the BOJ’s decision last week to widen the allowance band around its yield target was aimed at enhancing the effect of its ultra-easy monetary policy, rather than a first step toward withdrawing its massive stimulus program.
“This is definitely not a step toward an exit. The Bank will aim to achieve the price target in a sustainable and stable manner, accompanied by wage increases, by continuing with monetary easing under yield curve control,” Kuroda said in a speech delivered to a meeting of Japan’s business lobby Keidanren.
He also said Japan’s average consumer inflation will likely slow below the BOJ’s 2% target next fiscal year as the effects of soaring import costs dissipate.
But Kuroda said wage growth will likely increase gradually due to intensifying labor shortages and structural changes in Japan’s job market, which are leading to higher pay for temporary workers and a rise in the number of permanent workers.
“Labour market conditions, particularly for non-regular employees, are projected to tighten further,” he said.
“As Japan’s economy recovers, labor demand is expected to increase, particularly in the face-to-face services industry,” Kuroda said.
The BOJ shocked markets last week with a surprise tweak to its bond yield control. The move, which allows long-term interest rates to rise more, was aimed at easing some of the costs of prolonged monetary stimulus. (Reporting by Leika Kihara; Editing by Edmund Klamann)