In an address to the parliament today, BoJ Governor Kazuo Ueda indicated a forward-looking approach to monetary policy, wherein the anticipation of rising real wages could be a determinant for policy normalization, rather than their current state.
Ueda posited, “Real wages would likely have turned positive when a positive wage-inflation cycle kicks off.”
Delving into the timing of potential policy shifts, Ueda mentioned, “But in terms of how long we maintain our massive monetary easing… real wages don’t necessarily have to turn positive before that decision is made.”
Clarifying this point, he further elaborated that “The decision could be made if we can foresee with some certainty that real wages will turn positive ahead.”
Ueda also addressed the persistent gap between current inflation rates and the bank’s longstanding target, stating, “When looking at trend inflation, there’s still some distance towards our 2% target. That is why we are continuing with massive easing.”
