MNI BRIEF: BOJ Gov Nominee Ueda Says Easy Policy Appropriate

Bank of Japan governor nominee Kazuo Ueda on Monday again brushed off speculation about near-term policy tightening, saying it was appropriate for the BOJ to continue monetary easing.

“It will take some time for the BOJ to achieve 2% price target and the bank needs to maintain the easy policy to support the economy, which will create an economic environment that enables firms to raise wages,” Ueda said.

Appearing before a Upper House committee, he said the BOJ would need to preemptively restrict price rises driven by demand side, but it would not immediately act to deal with temporary price rises caused by cost-push inflation.

“If the BOJ acts on cost-push price rises, it will lower demand and worsen the economy through policy tightening,” he said.

Ueda also said easy policy has produced various side-effects but the policy is necessary to achieve the 2% price target. It was appropriate for the BOJ to maintain easy policy and find a way of implementing easy policy according to the situation.

However, Ueda said that he aims to mitigate the side-effects of easy policy without elaborating on how he would do that. While the underlying inflation rate has begun to rise, he wasn't sure whether it would reach 2%. Ueda echoed the BOJ’s baseline view that the year-on-year rise in core CPI will fall below 2% toward the middle of next fiscal year as cost-push factors wane.