BoJ Governor Kazuo Ueda said underlying inflation in Japan is expected to “accelerate moderately”, supported by a tight labor market and evolving corporate pricing behavior. He emphasized that firms are becoming more active in wage and price setting, sustaining a cycle in which wages and prices rise in tandem despite near-term distortions.
Ueda acknowledged that government measures to curb energy costs are currently weighing on headline inflation. However, he stressed that the underlying dynamics remain intact, with labor shortages and stronger wage growth continuing to support inflation over the medium term.
On fiscal policy, Ueda downplayed the long-term impact of a proposed suspension of Japan’s food consumption tax. While the plan could temporarily lower prices, he argued that “rational consumers” would look beyond short-term measures, meaning the effect on medium- and long-term inflation expectations would be limited.
