MNI BRIEF: Easy Policy Still Needed - BOJ's Nakagawa

Bank of Japan board member Junko Nakagawa said on Thursday the Bank's must continue with easy policy as the Japanese economy has not reached the 2% inflation target, although a shift in wage- and price-setting behavior is observed.

‘’If the synergies between actual price rises and the expected inflation rate rise strengthened, Japan’s inflation rate could rise upwardly,” Nakagawa told business leaders in Kochi City.

She added, however, that a reverse movement would occur if corporate pass-through of cost increases slows or pauses. Nakagawa also said that wage hikes this year posted the highest rise since 1993, but the outlook will depend on corporate profits, and the BOJ must pay attention to future developments.

An increase in long-term interest rates caused by a rise of medium- to long-term inflation expectations will not weaken the degree of easy policy on a real interest rate basis, she continued, adding the BOJ would pay attention to downside risks in overseas economies as inflation may remain at high levels and financial conditions tighten further.