Tokyo: The Bank of Japan lags behind its monetary easing policy on Thursday, raising inflation expectations, despite raising interest rates to tackle soaring prices in other countries. As the Bank of Japan struggles to achieve sustainable inflation in the world’s third-largest economy, policymakers have refused to move away from the measures taken 10 years ago. However, this decision remains increasingly isolated as peers raise interest rates and the yen falls against the dollar for the first time in 24 years. Emphasizing different approaches, the European Central Bank will announce its first rate hike since 2011 later Thursday.
Prices are rising in Japan, and the Bank of Japan has raised its inflation forecast for 2022-23 from 1.9% in April to 2.3% “due to rising prices of energy, food and durable goods.” “In the future, as energy prices stabilize, the rate of increase is expected to slow,” he said. The Bank of Japan added that it would continue to buy unlimited government bonds to keep interest rates at minus 0.1% and keep the cap on long-term government bonds low. These monetary easing policies aim to achieve sustainable inflation of 2%, which banks consider to be the key to stable growth.
The central bank sees the current price hike caused by the roar of pandemic supply and the rise in commodity prices associated with the Ukrainian war as temporary. Therefore, it sees no need to change tack while counterparts elsewhere are moving to curb inflation. Ryutaro Kono, Chief Economist at BNP Paribas, said: And some tactile rate increases will not address Japan’s current inflationary pressures.
Stephen Anglick, senior economist at Moody’s Analytics, told AFP: “Japan’s inflation is primarily driven by high prices for imported food and energy that the Bank of Japan cannot reach,” he added, adding that rate hikes do not guarantee a stronger yen. , Despite the rate hikes of their respective central banks, they are falling against the dollar. “
After the announcement on Friday, the dollar soared to 138.55 yen before it fell slightly, but it is still compared to 115 yen at the beginning of the year. The Bank of Japan has lowered its economic growth outlook this year from 2.9% last time to 2.4%, warning that “very high uncertainty” remains from COVID-19 to the situation in Ukraine.
Haruhiko Kuroda argued Thursday afternoon that he was committed to the bank’s mitigation policy “until the (price) target was achieved sustainably.” The depreciation of the yen against the dollar has admitted that it is causing some difficulties as “the outlook becomes more uncertain, corporate planning becomes more difficult and the economy is negatively impacted.” However, he emphasized that the currency intervention was the protection of the Ministry of Finance and that the depreciation of the yen benefited exporters. – AFP