It is difficult to deny that Japan’s economic recovery is weak and prices do not seem to be rising, Bank of Japan (BOJ) board member Yutaka Harada said yesterday.
The downbeat assessment from Harada, an academic economist who joined the policy board about a year ago, comes after the IMF slashed its forecasts for Japanese growth for this year and next. The IMF forecast an economic contraction next year if Japan goes ahead with a planned sales-tax hike.
The BOJ’s main price gauge has been stuck at about zero since the middle of last year, even with massive monetary stimulus aimed at stoking inflation.
“I am not denying that the economic recovery is still weak,” Harada said in a speech in Shimonoseki, Japan. “That is why the bank, after the introduction of QQE [quantitative and qualitative easing], has been enhancing its monetary easing by expanding QQE and by introducing QQE with a negative interest rate.”
At a news conference later in the day, Harada was asked if an expansion of the negative rate was possible at this month’s meeting.
“You cannot say it is impossible,” he said.
Although Japan’s prices have not risen as much as initially expected, they are likely to rise eventually as the effects of a drop in energy prices fades and oversupply in the economy recedes, Harada said in the speech.
He later told reporters that although the achievement of the bank’s 2 percent price target would be delayed, it is possible to reach it.
“As energy prices will not continue falling forever, I am confident that the CPI [consumer price index] including energy — that is, CPI for all items less fresh food — will also start to rise as the effects of the fall in energy prices dissipate,” Harada said.
If risks to the price trend materialize, the bank should add more stimulus “without any hesitation,” Harada said, echoing language used by BOJ Governor Haruhiko Kuroda and other bank officials.
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