MNI BRIEF: 2% Target In View, More Time Needed - BOJ's Tamura

Bank of Japan Board Member Naoki Tamura said on Wednesday the achievement of the bank's 2% price target was clearly in view, however, the continuation of easy policy was appropriate as more time is needed.

He told business leaders in Kushiro City the 2% target should become clearer between Jan-March 2024 when wage hike momentum, including actual price moves in 2H 2023, become clearer. Corporate price-setting behavior has changed from the deflationary period, he added.

“A virtuous cycle between wages and prices, and the improvement of consumer sentiment caused by wage hikes in addition to pass-through of cost increases are observed,” Tamura said. He also noted the labour shortage and an increase in job hopping will play an important role to maintain the change in corporate wage- and price-setting behavior and strengthen the virtuous cycle.

Tamura also said the possibility of stronger price moves cannot be ruled out as pass-through of cost increases continues and the pace of services price rises accelerates. “There are high uncertainties over upside and downside risks to prices. But I cannot rule out the probability of higher prices amid hope for sustainable wage hikes on the back of tight labor market conditions and high actual consumer prices this year,” Tamura said.