MNI: End Of Deflation, Zero Lower Bound In Sight - BOJ's Uchida

Bank of Japan Deputy Governor Shinichi Uchida said on Monday that anchoring inflation expectations to 2% represented a major challenge, but the end of its battle with deflation and the zero lower bound is in sight.

Uchida said at the 2024 BOJ-IMES Conference that, “this time is different” and the “social norm” is set to be dissolved.

“After ten years of experience under QQE, YCC, and the negative interest rate policy, the Bank of Japan declared this March that these unconventional policy tools had fulfilled their roles,” Uchida said. “We returned to a conventional monetary policy framework, aiming at a 2% price stability target through adjustments of the short-term policy rate, which means we have overcome the zero lower bound.”

He also said that two things are needed to change the current situation: resolving the original causes of deflation and overcoming the deflationary norm.

“If the structural changes in the labour market continue, companies will have to build business models that generate enough profits and wages to keep and attract employees,” Uchida said. “As to price-setting strategy, companies need to rewrite their prices in their menus promptly, reflecting their labour costs while paying due attention to the possible impact on demand for their products.”