Jun 03, 2022 03:00AM ET
By: AnalysisWatch
Rising prices for everyday goods could weigh on household sentiment, Bank of Japan Governor Haruhiko Kuroda said Friday, suggesting that mounting inflationary pressures are becoming a risk to the country's weak economy.
Japanese core consumer inflation rose 2.1% year-on-year in April, exceeding the central bank's 2% target for the first time in seven years, mainly due to rising fuel and commodity costs.
Kuroda stated that excessive price increases are undesirable if household income growth remains weak.
"Prices are rising, especially for goods that households buy frequently, such as gasoline and food," Kuroda said in parliament. "These kinds of price increases could affect consumer sentiment, so we need to watch developments carefully."
Kuroda has repeatedly stated that the BOJ will not scale back its massive monetary stimulus as the recent rise in inflation was mainly caused by commodity costs and is likely to be temporary.
"What the BOJ hopes to achieve is a positive cycle in which prices gradually rise in line with strong economic growth and wage increases," Kuroda said.
"It is important to create an economic environment in which wages can increase more," he added, stressing the need to keep monetary policy extremely loose.
At the same parliamentary session, Prime Minister Fumio Kishida said inflation in Japan is much lower than in Western economies because of government subsidies, such as those to cap gasoline prices.
"While measures to mitigate the pain from price increases are crucial, it is also important that household incomes rise," Kishida said.
Kishida said there was no need to change a joint statement agreed to by the government and BOJ in January 2013, in which the central bank pledged to achieve 2% inflation with loose policy.
Some opposition lawmakers have blamed the BOJ's ultra-low interest rates for driving up the cost of living for households and have called for a revision of the joint statement to give the central bank leeway to reduce incentive