BoJ Deputy Governor Shinichi Uchida voiced caution over a hasty shift in monetary policy amid current economic climate. In an interview with Nikkei, Uchida emphasized that Japan was far from needing to hastily raise interest rates.
“The risk of missing the opportunity to achieve our 2% target with a premature policy shift is bigger than that of being too late in tightening policy and allowing inflation to continue running above 2%,” Uchida explained.
Uchida noted the budding changes in Japanese companies’ behavior, which have been rooted in the country’s deflationary period. He stressed the importance of nurturing these developments with care. However, he cautioned that uncertainty remains high over inflation outlook, including impact of pricing behaviors and wage hikes by companies.
“We have not reached a point where we can foresee the 2 percent price stability target can be attained stably and sustainably,” Uchida said. He also recognized the burden placed on households due to more than 2% rise in core CPI, reinforcing the importance of supporting the economy with current monetary easing to stabilize inflation at 2%, in tandem with wage growth.
Uchida also touched on foreign exchange rates, noting the unwanted uncertainty caused by Yen’s rapid and one-sided depreciation. He highlighted the importance of stable foreign exchange rates, which should reflect economic and financial fundamentals. “The BOJ will coordinate with the government, and closely monitor developments in the foreign exchange market and their impact on the economy and prices,” he added.
