BoJ Governor Kazuo Ueda emphasized today that the central bank remains “vigilant” to upside surprises in “underlying inflation.
While recent “very high” inflation has been driven largely by temporary factors like import costs and food prices, there’s still a possibility that underlying inflation could accelerate more quickly than expected.
Ueda warned that if such “broad-based inflation” materializes, BoJ would need to respond by raising interest rates and even take “stronger steps”.
However, for now, he reaffirmed the view that underlying inflation remains “just a bit” short of the 2% target, though it is on track to gradually converge to that level.
Meanwhile, data released today showed Japan’s services producer price index rose 3.0% yoy in February, a deceleration from January’s 3.2% and below expectations of 3.1%.
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