Bank of Japan Governor Kazuo Ueda said there was “very high uncertainty” over whether companies would continue raising prices and wages, stressing anew the bank’s resolve to maintain ultra-loose monetary policy.
He also offered a cautions take on the overseas economic outlook, warning of the fallout from aggressive U.S. interest rate hikes and sluggish growth in the Chinese economy.
The key to the outlook for monetary policy is whether strong wage growth and consumption, rather than cost pressures from rising import costs, become the key driver of inflation, Ueda said.
“We’re seeing some signs of change in corporate wage- and price-setting behaviour. But there is very high uncertainty on whether these changes will broaden,” Ueda told business leaders in the western Japanese city of Osaka on Monday.
The BOJ maintained ultra-low interest rates on Friday and its pledge to keep supporting the economy until inflation sustainably hits its 2% target, dispelling market speculation that rising inflation would soon prod the bank to phase out its massive monetary stimulus.
Ueda said the BOJ was “not fully convinced” that wage hikes would keep accelerating, as many companies seemed undecided on their wage strategy for next year and beyond.
“The policy prescription to deal with inflation varies depending on what is causing the price rises,” Ueda said.
“The cost-push inflation we’ve seen so far hurts companies and households. That’s why we are supporting demand and the broader economy with easy monetary policy,” he added.
