The Bank of Japan governor says he wants more time to assess the inflation trend

Kazuo Ueda

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If the Bank of Japan sees that it can reach its price target, it may need to normalize monetary policy, Ueda said.

Bank of Japan Governor Kazuo Ueda said on Monday he wants more time to assess whether wage growth will be sustained enough to keep inflation at the bank’s 2% target, suggesting he is in no rush to reduce. the stimulus.

Ueda faces hurdles as slowing global growth clouds prospects for a sustained recovery in inflation and wages, a prerequisite for phasing out his predecessor’s controversial monetary stimulus.

“Looking at current economic, pricing and financial developments, it is appropriate to keep tabs on the yield curve for now,” Ueda said at a press briefing on Monday.

“If not, we may have to create a more sustainable framework with an eye on the side effects of monetary easing.”

The 71-year-old academic’s term began on Sunday, succeeding Haruhiko Kuroda, whose second five-year term ended on Saturday.

“Given the high economic uncertainty, the Bank of Japan will communicate closely with the government and guide monetary policy with flexibility,” Ueda told reporters after meeting Prime Minister Fumio Kishida to receive his official letter of appointment.

Ueda also said he agreed with the premier that there was no immediate need to revise a joint statement between the government and the Bank of Japan, which pledged the central bank to reach its 2% inflation target as soon as possible.

Markets are hunting for clues as to when Ueda might phase out an unpopular bond-yield control policy that has drawn criticism for distorting markets and hurting banks’ margins.

At parliamentary confirmation hearings in February, Ueda stressed the need to maintain an ultra-loose policy to ensure Japan sustainably hits the Bank of Japan’s 2% inflation target, supported by wage growth.

But with inflation above target, many analysts expect the central bank to adjust or end the curve’s control policy, which combines a target of 0.1% for short-term interest rates and 9% for 10-year yields. years, already in this quarter.

Japan’s long-stagnant inflation and wage growth are showing signs of turning around. After hitting a 41-year high of 4.2% in January, core consumer inflation remains above 3% as more companies raise prices in response to rising raw material costs.

Ueda will chair his first monetary policy meeting on April 27-28, when the central bank will produce new quarterly growth and price forecasts through fiscal 2025.