AKITA — Bank of Japan board member Asahi Noguchi said on Thursday the central bank must keep interest rates ultra-low as the country has yet to achieve the bank’s 2% inflation target in a sustainable fashion.
“While not as much as other countries, Japan’s consumer prices have risen sharply. This increase is driven mostly by rising imported goods prices,” Noguchi said in a speech to business leaders in Akita, northern Japan.
“What’s more important in deciding monetary policy is trend inflation based on domestic macro-economic factors, which remains at low levels,” he said.
Noguchi said Japan’s core consumer inflation, which exceeded the BOJ’s 2% target for seven straight months in October, will likely slow back below that level once the impact of rising raw material prices and other cost-push factors dissipate.
Slow wage growth has kept services prices from rising, preventing inflation from accelerating much in Japan, he said, calling for the need to support the economy with ultra-loose monetary policy until nominal wages perk up.
“To promote wage growth, the BOJ needs to patiently maintain its current monetary easing,” said Noguchi, who is known as an advocate of aggressive monetary easing.
The BOJ remains an outlier among a global wave of central banks tightening monetary policy to combat soaring inflation, as it focuses on propping up a fragile economy only recently emerging from the COVID-19 pandemic’s scars.
BOJ Governor Haruhiko Kuroda has said the central bank has no intention of rolling back stimulus until strong domestic demand and wage growth, instead of cost-push factors, drive up inflation toward its 2% target. (Reporting by Leika Kihara Editing by Shri Navaratnam and Sam Holmes)