In complete contrast to Pakistan: Bank of Japan policymaker for keeping ultra-loose monetary policy
Business
The remarks echo those of BOJ Governor Kazuo Ueda
KOCHI/LAHORE (Reuters/Web Desk) – Bank of Japan policymaker Junko Nakagawa said on Thursday the central bank must maintain ultra-loose monetary policy for the time being due to uncertainty over prospects for achieving the bank's 2 per cent inflation target in a sustainable fashion, Reuters reported.
Read more: Rate hikes: Many countries moving in opposite direction of US. Can Pakistan follow suit?
An increasing number of Japanese companies were raising prices and wages, Nakagawa said, adding that there was a chance inflation could accelerate more than initially expected.
But there was also a risk inflation could slow once the pass-through of higher costs moderate, she said, according to Reuters.
Her statement is in complete contrast to the fears gripping Pakistan that the central bank will go for another rate despite the fact that the interest rates are already touching a record-high 22pc level.
The possible rate hike, apart from devaluation, amid the rising inflation was reason why the Pakistan Stock Exchange had witnessed downward movement in recent sessions. However, the trend reversed after Chief of Army Staff Gen Asim Munir assured the businessmen of taking necessary actions regarding the exchange companies, which bolstered the rupee.
But another rate hike by the State Bank of Pakistan still seems inevitable as the rising fuel prices and energy tariffs are sustaining and boosting inflation while the IMF has also set tight monetary policy as one of the strict conditions under the $3 billion deal signed with Pakistan.
Read more: High interest rates to stay with monetary tightening written as sole cure
On the other hand, Reuters quoted Nakagawa as saying that while the job market is tightening, the outlook for wage growth depends largely on corporate earnings, stressing the need to stay vigilant to economic risks such as slowing overseas growth.
"We're seeing some positive developments in Japan's economy with signs of change in corporate price and wage-setting behaviour," Nakagawa said in a speech to business leaders in the city of Kochi.
"But we're not at a stage where we can judge that Japan has achieved our price target in a stable, sustainable fashion."
The remarks echo those of BOJ Governor Kazuo Ueda, who has stressed the need to "patiently" maintain ultra-low interest rates to ensure Japan achieves 2pc inflation driven by solid domestic demand and wage growth.
Japan's core inflation hit a four-decade high of 4.2pc in January and remained above the BOJ's 2pc target for 16 straight months in July, as more firms pass on higher raw material costs.
But the government has refrained from officially declaring an end to deflation, arguing that doing so requires not just underlying price rises but clear signs that Japan won't return to periods of price falls.
