BoJ Deputy Governor Ryozo Himino, in a speech today, affirmed the central bank’s commitment to continued monetary easing. He noted, “the Bank will patiently continue with monetary easing until sustainable and stable achievement of the price stability target, accompanied by wage increases, comes in sight.”
He acknowledged the positive changes in firms’ wage- and price-setting behavior, noting “solid progress” and “signs in the right direction.” However, he warned of the risks of reverting to a deflationary state if a virtuous cycle between wages and prices is not established.
Explaining further, Himino commented on the longstanding norm in Japan where neither wages nor prices could rise significantly. “Japan had worked for many years to break free from this,” he added, “and simply returning to such a frozen state after the current high inflation comes down would not be a desirable outcome either.”
Himino highlighted the longstanding norm in Japan where “neither wages nor prices could rise”. He stressed that Japan’s efforts to break free from this stagnation, adding, “simply returning to such a frozen state after the current high inflation comes down would not be a desirable outcome”.
He also outlined the multiple challenges facing Japanese monetary policy, including addressing current inflation, supporting moderate economic recovery, encouraging wage increases, and preventing a return to deflation. “The Bank is struggling to find a solution and this is by no means an easy task,” he admitted.
