(Original title: Governor of the Bank of Japan: Easing policy must continue to support economic growth in the future)
News from the Financial Associated Press on December 26 (edited by Zhou Ziyi)Bank of Japan Governor Haruhiko Kuroda on Monday dismissed the possibility of Japan exiting its ultra-loose monetary policy in the short term, saying that rising labor shortages are expected to prompt companies to raise wages.
Speaking at an event hosted by business lobby group Keidanren on Monday, Haruhiko Kuroda said the BOJ’s decision last week to widen the range in which yields fluctuate was aimed at making its ultra-loose policy sustainable and smooth, not a step away from its massive stimulus program.
“This is definitely not an exit step. The BOJ will aim to continue easing monetary policy under yield curve control to achieve the price target in a sustainable and stable manner while increasing wages.”
Last Tuesday, the Bank of Japan announced in its monetary policy resolution that it would raise the upper limit of the fluctuation range of Japan’s 10-year government bond yield from the current 0.25% to around 0.5%.
data growth
“Japan’s labor market conditions are expected to tighten further, and firms’ behavior in setting prices and wages may also change,” Kuroda said.
“In this sense, Japan is approaching a critical juncture in emerging from a prolonged period of low inflation and low growth,” he added.
Kuroda believes that wage growth is likely to pick up gradually due to a deepening labor shortage and structural changes in Japan’s job market, which will lead to higher wages for temporary workers and an increase in the number of permanent workers.
The strength of wage growth is seen as key to the Bank of Japan raising its yield curve control (YCC) target. The Bank of Japan currently sets short-term interest rates at -0.1%, and the 10-year bond yield target is maintained at around 0%.
However, with inflation exceeding its 2 percent target, speculation is rife that the BOJ will raise its yield target when Kuroda’s term ends in April next year.
further examination
Price gains are widening as more businesses pass on rising costs to households. Japan’s core consumer price index (CPI) reached 3.7% in November, a 40-year high.
Kuroda said the BOJ must examine whether such a change in corporate pricing behavior would become the new normal in Japan.
Companies, however, remain cautious about increasing fixed costs amid an uncertain economic outlook. Wages for long-term workers have barely risen.
Kuroda noted that the outcome of next year’s spring wage talks between big companies and unions will be key to the outlook for wage growth.
Japanese Prime Minister Fumio Kishida also called on business leaders to help achieve wage growth high enough to compensate households for rising living costs.