BOJ policymakers saw need for easy policy despite rising prices – March meeting summary

FILE PHOTO: A man wearing a protective mask walks past the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo
FILE PHOTO: A man wearing a protective mask walks past the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon

March 29, 2022

By Leika Kihara

TOKYO (Reuters) – Bank of Japan policymakers stressed the need to keep monetary policy ultra-loose, even as some of them saw signs of growing inflationary pressure from the Ukraine crisis, a summary of opinions at their March meeting showed on Tuesday.

Japan’s consumer inflation will clearly accelerate from April and may hover around 2% for some time due mainly to the boost from energy price rises, one member was quoted as saying.

“As wholesale prices rise at historical levels, upward pressure is gradually heightening for consumer inflation,” another member said.

Other members, however, warned such cost-push inflation will prove short-lived due to weak domestic demand, the summary showed.

“Consumer inflation may move around 2% in the first half of fiscal 2022 due to rising raw material costs. But it could undershoot expectations in the latter half of the year if commodity prices turn down,” one member said.

Most of the opinions called on the need for the BOJ to stick to ultra-loose monetary policy as the war in Ukraine heightened uncertainty over the global outlook.

“Unlike the United States or Britain, Japan isn’t in a situation where inflation continuously exceeds 2%…It’s therefore important to support the economy’s recovery from the coronavirus pandemic by maintaining monetary easing,” one member said.

At the March meeting, the BOJ maintained its massive stimulus and warned of heightening risks to a fragile economic recovery from the Ukraine crisis.

Japan’s core consumer inflation hit 0.6% in February, well below the BOJ’s 2% target, as weak consumer spending discourage firms from raising prices. But analysts expect inflation to approach 2% from April, due to soaring fuel costs and the dissipating effect of past cellphone fee cuts.

(Reporting by Leika Kihara; Editing by Jacqueline Wong & Shri Navaratnam)