MNI BRIEF: BOJ Worried About Rising CPI - Summary of Opinions

At least two Bank of Japan board members were worried about stronger-than-expected consumer prices at the March 9-10 policy-setting meeting, the summary of opinions released by the BOJ on Monday showed.

“Firms have continued to pass on cost increases to selling prices, and the year-on-year rate of change in services prices excluding imputed rent has risen to the range of 1.5-2.0 percent. Going forward, it is necessary to pay full attention to upside risk to prices,” one member said.

Another member said “it is possible that the significant price shocks since last year stemming from overseas developments will change the "norm" for prices. If this happens, firms' price- and wage-setting behavior may remain positive even after upward pressure of costs wanes and higher-than-expected inflation may continue.”

“CPI inflation is expected to fall below 2% in the second half of this year. In order for it to accelerate again toward 2% thereafter, services prices, which are sticky, need to see a sustained rise. An essential condition for this to happen is further wage increases,” one member said.

Another member said “there has been a change in the "norm" of prices not increasing easily."

"However, if improvement in the output gap is delayed or if wage hikes do not spread enough or lack sustainability, there is still a risk that Japan will return to a situation where prices do not increase easily along with an expected waning of upward pressure of costs,” the member said.