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MNI BRIEF: BOJ Minutes Show Upside Inflation Risk Concerns

(MNI) Tokyo
(MNI) Tokyo

One Bank of Japan board member highlighted the risk of significant upside to inflation and the need for the BOJ to carefully monitor the impact of foreign exchange rates at the September 21-22 meeting, the minutes released on Wednesday showed.

“One member noted that price negotiations among firms continued to take place, and that among other risks, that of consumer prices deviating significantly upward from the baseline scenario, including the impact of foreign exchange rates, needed to be examined humbly and without any preconceptions,” the minutes showed.

“A few members said that a change in firms' price-setting behavior might have started to occur.”

However, other members maintained cautious view on the outlook for prices. “A few other members pointed out that firms' moves to pass on cost increases to prices had spread recently, but if this was a one-off situation, inflation could instead decelerate in and after 2023,” the minutes showed.

However, officials continued to debate the durability of elevated inflation over coming years and its ability to meet the BOJ's 2% target. “Some members pointed out that, although the inflation rate was likely to exceed 2% for the time being, there was still a long way to go to achieve the price stability target in a sustainable and stable manner, given the outlook for prices.” (See MNI BOJ WATCH: Closer To 2% Target, But Easy Policy Remains)

“On this point, one member said that, since the norm that prices would not rise easily had been deeply entrenched in Japan, it was vital that it be changed for a virtuous cycle to operate in Japan's economy in which wage hikes exceeded inflation in a sustainable manner,” the minutes showed.

“A different member commented that, at present, it was necessary to carefully monitor whether a virtuous cycle between wages and prices would operate in Japan, and there was no need to immediately change the current monetary policy stance, although attention should be paid to the side effects,” the minutes showed.

MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com
MNI Tokyo Bureau | +81 90-2175-0040 | hiroshi.inoue@marketnews.com

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