BoJ board member Naoki Tamura said in a speech that the wage–price cycle the Bank has been aiming to establish remains intact, with inflation increasingly driven by domestic factors rather than imported cost shocks. He argued that inflation is “becoming endogenous and sticky,” as higher labor costs replace raw material prices as the primary driver.
Tamura noted, as early as this spring the Bank could judge its price stability target achieved — provided wage growth in 2026 is confirmed to be consistent with the 2% goal for a third consecutive year. Such confirmation would mark a significant milestone in Japan’s long struggle to exit deflation.
He cautioned, however, that price developments warrant close attention as Yen resumes depreciation. Also, as firms continue to lift wages, there is strong potential for higher labor costs to be passed through across production, distribution and retail stages.
Tamura also there remains “considerable distance” to the neutral interest rate level, implying that even further rate hikes would leave financial conditions accommodative. The challenge, he said, is to avoid both a premature tightening that risks deflation and an environment of persistent inflation that exceeds what can be considered moderate — a balancing act that keeps normalization gradual.
