Inflation Slowing Next Year, Japan Calls For BOJ Coordination

(CTN News) – When one-off factors are removed, Japan’s inflation will likely slow to 1.5% next year, a government spokesperson said on Monday, urging the central bank to work towards reaching its target of 2%.

It is likely that the Bank of Japan (BOJ) will tweak its yield control policy at its two-day rate review that concludes on Friday as a result of creeping inflation and robust wage growth.

“Specific monetary policy means are within the BOJ’s Inflation jurisdiction. According to Yoshihiko Isozaki, government spokesperson, “We hope that the government will take appropriate, necessary steps in close coordination with us based on what we agreed to in our joint statement.”

In line with the joint agreement signed with the government in 2013 and reaffirmed by the current administration, the BOJ has committed to achieving 2 percent as soon as possible.

As part of its mid-year review of its forecasts, the government stated last week that it expects overall consumer inflation to reach 2.6 percent for the fiscal year beginning in April and 1.9% in 2024.

“Excluding the base effect of the government’s utility subsidies, we expect to move around 1.5 percent in fiscal 2024,” Isozaki said,

Suggesting that trend inflation will fall short of the BOJ’s target rate.

“We are committed to achieving a positive cycle of wages and inflation, as well as growth and distribution, in an effort to prevent deflation,” he said.

In response to a question about whether conditions were in place for the Inflation BOJ to gradually phase out its massive stimulus program, Isozaki made the following statement.

There is a difference in tone between those remarks and those made earlier on Monday by Masato Kanda, who stated that inflation and wage growth had exceeded expectations.

Kanda told reporters that he expects the BOJ to revise up its forecasts later this week, adding that corporate price- and wage-setting behavior in Japan has changed as a result of these changes.

According to Kanda, “various expectations and speculations Inflation are spreading regarding some kind of monetary policy adjustment.”

Reuters has reported that the BOJ is leaning toward maintaining its yield control policy this week, but there is no consensus within the bank.

In spite of the fact that the board is likely to revise up its core consumer inflation forecast for the year that began in April, its forecasts for fiscal 2024 and 2025 are likely to remain largely unchanged from current estimates.

According to BOJ Governor Kazuo Ueda, the central bank is considering whether recent inflation and wage growth will be sustained next year, and whether it will be backed more by domestic demand.
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