MNI INTERVIEW2: Kuroda’s BOJ To Hold To Policy Stance - Kameda

Former Bank of Japan Chief Economist Seisaku Kameda has added his voice to the chorus who see Japan’s core consumer price index likely to rise to around 3% towards the end of this year - but the BOJ’s ultra-easy monetary policy stance remaining unchanged.

Kameda stressed that the BOJ is unlikely to respond directly to cost-push inflation and the yen’s short-term fall, awaiting the appointment of a new BOJ governor and deputies in Spring 2023. While he said the BOJ could examine or review monetary policy, including the impact of cost-push inflation developments, he did not elaborate.

“Upward pressure from high food and durable goods on consumer prices will continue during the current fiscal year (to March 2023), paving the way for core CPI to rise to around 3%,” Kameda told MNI in an interview. But higher core CPI would not lead to a policy adjustment by the BOJ as it would not be consistent with the central bank’s 2% goal in a stable and sustainable manner, he pointed out.

His comments on Japan’s inflation outlook and BOJ policy echo those of two other former BOJ chief economists, Kazuo Momma and Hideo Hayakawa, made in interviews with MNI in the past week (See MNI INTERVIEW2: BOJ Policy Seen On Hold Despite CPI Rise-Momma)

According to Kameda, core CPI is likely to fall around 2% early in 2023 as the base impact of high energy prices wanes. But the index should then stabilize around that level. “The impact of cost-push will likely continue during the first half of fiscal 2023 but the impact should ease afterward,” Kameda said.

Kameda, however, warned of the risk cost-push inflation could be stickier due to prolonged supply-chain disruption, a worst-case scenario for Japan’s economic growth as wage hikes could not catch up with price rises immediately.

SLOWDOWN, NOT RECESSION

“Oversea demand is falling at a quickening pace. (Domestic) consumer spending hasn’t fallen,” he noted, but said high frequency data pointed to sales slowing in the second half of 2022.

“Judging from the above two factors, the pace of economic slowdown is worsening. But the economy is recovering post-Covid-19 and I don’t see zero growth or contraction, although there is the possibility that the growth rate will be slower than previously expected,” Kameda said.