MATSUYAMA, EHIME PREF. – The Bank of Japan is not ready to take additional monetary easing measures soon, despite growing concern over disinflation triggered by a plunge in global crude oil prices, BOJ Deputy Gov. Hiroshi Nakaso implied Monday.
“If falling oil prices lower inflation but inflation expectations remain unaffected and inflation keeps heading toward 2 percent as a trend, there will be no need to respond through monetary policy,” Nakaso said in a speech to business leaders in Matsuyama, Ehime Prefecture.
As crude oil prices are likely to rebound moderately ahead, Japan’s year-on-year inflation rate is “expected to reach around 2 percent in or around fiscal 2015,” said Nakaso, whose policy position is close to that of BOJ Gov. Haruhiko Kuroda, the leader of Japan’s unorthodox campaign of “quantitative and qualitative” monetary easing to battle deflation.
Nakaso’s remarks come as consumer prices rose in January at their slowest pace in more than a year and a half, fanning concern the central bank may fail to achieve its inflation target.
The core consumer price index, which does not reflect volatile fresh food prices, edged up 0.2 percent in January from a year earlier, excluding the impact of last April’s consumption tax hike to 8 percent, the government said last month.
Central banks in other nations, including the European Central Bank, have been eager to ease their monetary policies because a downturn in crude oil prices could increase deflationary pressure worldwide.
Last October, the BOJ decided to increase its purchases of Japanese government debt to make financial conditions even more accommodative.
While emphasizing that lower oil prices will not prod the BOJ into taking action in an “automatic” manner, Nakaso added that the central bank “will make adjustments as necessary to achieve the price stability target at the earliest possible time, if there are changes in the underlying trend in inflation.”
The bank is scheduled to start its two-day Policy Board meeting next Monday.
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