At a parliamentary confirmation hearing, incoming BoJ Governor Kazuo Ueda said, “current policy is a necessary, appropriate means to achieve 2% inflation,” despite various side effects emerging from the stimulus.
“Japan’s trend inflation is likely to rise gradually. But it will take some time for inflation to sustainably and stably achieve the BOJ’s 2% target,” he said.
“Consumer inflation is likely to fall below 2% in the latter half of the next fiscal year. It takes time for the effect of monetary policy to appear on the economy. ”
“It’s standard practice to act preemptively to demand-driven inflation, but not respond immediately to supply-driven inflation. Otherwise, the BOJ will be cooling demand, worsening economy and pushing down prices by tightening monetary policy.”
“If trend inflation heightens significantly and sustained achievement of the BOJ’s 2% target comes into sight, the central bank must consider normalizing policy. But if trend inflation lacks strength, the bank must continue how to maintain its ultra-easy policy, while paying attention to deterioration in market function.”