MNI BRIEF:BOJ Dec Minutes Highlight Inflation Momentum Worries

One Bank of Japan board member highlighted a strengthening of the momentum of inflation at the December 19-20 policy-setting meeting, the minutes released by the BOJ on Monday showed.

“Inflation in prices of not only goods but also services had gradually risen, and that the trimmed mean and weighted median of the year-on-year rate of change in the CPI had seen a further rise; this suggested a possibility that the momentum of inflation had started to strengthen,” the minutes showed.

“One member said that an increasing number of firms had passed on cost increases to their selling prices, and that this may contribute to strengthening underlying inflation or lead to a virtuous cycle through an increase in corporate profits.”

“A few members also expressed the view that moderate inflationary pressure could continue, given, for example, the price situation in overseas economies, the situation of the restructuring of supply chains, and developments in the pass-through of cost increases to selling prices by Japanese firms,” the minutes showed.

“In addition, members shared the recognition that the underlying inflationary pressure was projected to increase on the back of improvement in the output gap and rises in medium- to long-term inflation expectations and in wage growth,” they said.

A different member showed a cautious view, saying, “while both actual prices and inflation expectations had risen, the recent rise in services prices was largely due to the impact of high raw material costs, and that there was still a long way to go to achieve the price stability target of 2% in a sustainable and stable manner.” (See MNI BRIEF: Japan Inflation To Slow From Feb: BOJ Kuroda)