MNI STATE OF PLAY: BOJ Kuroda: No Policy Change If CPI Hits 2%

Bank of Japan Governor Haruhiko Kuroda said on Friday that Japan’s core consumer prices may rise to 2% on the back of high import prices and the fading impact of cheap mobile phone charge in or after April but will not cause any policy adjustments.

“The rapid rise in commodity prices (caused by the Russia’s invasion of Ukraine) will boost (Japan’s) import prices and then push up core CPI to close to 2%,” Kuroda told reporters, see: MNI BRIEF: BOJ Policy And Guidance Steady, Lowers Econ View.

“But that’s cost-push price rise will lower corporate profits and squeeze households’ real purchasing power. It is appropriate for the BOJ to maintain easy policy to achieve the 2% price target.”

Even if Japan’s core CPI rises to 2% due to the rise in import price, it will not the price target that the BOJ aims, he said.

Kuroda also brushed off the view that Japan, the U.S. and Europe will fall into stagflation and labelled the rapid rise in import costs as a bad price rise, although he repeated a weak yen will have positive impact on Japan’s economy as a whole.

He also said that initial wage hikes by major firms are relatively at high levels but it’s premature to judge overall as data from smaller firms is not yet available.

The BOJ, as widely expected, stuck with powerful monetary easing amid growing downside risks to economy and upside risk to prices, although major central banks moved to tighter policy. The bank lowered its assessment on economy and private consumption as economic activity has seen a worsening terms of trade and higher costs caused by yen weakness.

The dollar rose to the JPY119 level this week for the highest level in more than six years, pushing up further import costs and squeeze corporate profits.

The focus has now shifted to the April 27-28 policy-setting meeting when the board reviews the medium-term economic growth and inflation rate forecast. BOJ officials are also awaiting the March Tankan business sentiment survey due out on April 1 and on reports at the quarterly branch managers’ meeting on April 11 ahead of of the April meeting.