Bank of Japan policymakers hope the accelerating rollout of COVID-19 vaccinations will prop up the economy, but see any inflationary pressures as subdued given the fragile recovery, a summary of their discussions at a June 17-18 meeting released Monday shows.
The nation has only recently emerged from a fourth wave of infections. A decline in confirmation of new cases and an increase in vaccinations prompted authorities to ease a state of emergency in Tokyo and eight other prefectures on June 20.
“A positive economic cycle is kicking off in Japan due to progress made in vaccinations,” one of the nine board members is quoted as saying.
At the June meeting, the BOJ kept monetary policy steady and unveiled a plan to boost funding to fight climate change, to be rolled out by the end of this year.
“While uncertain and patchy, progress in vaccinations has made the global economic recovery clearer. Japan hopefully will see something similar happen,” the summary shows another saying.
The upbeat assessments underscore the central bank’s view the economy will emerge from its doldrums on robust exports and an uptick in domestic demand, without needing additional monetary support.
Some policymakers saw signs of a rebound in inflation, with one voicing hope that pent-up demand will help accelerate inflation in the latter half of this year, the summary shows.
But none saw excessive inflationary pressure building up, as soft demand and cuts to cellphone fees offset rising input costs.
“Rising commodities prices and improvements in domestic demand may push up inflation, though such upward price pressure will lack momentum,” one member said.
Japan’s economy shrank an annualized 3.9% in the first quarter, and analysts expect any rebound in the April to June quarter to be modest as COVID-19 movement restrictions have limited consumption.
Core consumer prices rose just 0.1% in May from a year earlier, as weak spending discouraged firms from passing on higher raw material costs to households.
Regarding the BOJ’s planned climate change plan, one board member said it must be a “flexible” one as the circumstances around the topic remain fluid, the summary shows.
A government representative who attended the June meeting called the idea a “timely” plan, coming as Prime Minister Yoshihide Suga’s administration promotes green innovation among the key parts of its strategy to boost the nation’s economic growth.
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