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The Bank of Japan is expected to keep its massive monetary easing policy unchanged this year, meaning the country will enter its 10th year with an unprecedented ultraeasy policy.

The process to choose a successor to BOJ Gov. Haruhiko Kuroda, whose term expires in April 2023, will also begin in earnest this year, before the central bank can normalize its monetary policy.

“We will not begin moves to normalize monetary policy unlike in Europe and the United States,” Kuroda said at a news conference in late 2021, suggesting that the BOJ will continue its large-scale easing, including the negative interest rate policy.

The comment comes as the European and U.S. central banks have started tightening their policies to rein in rising inflation caused by spikes in materials prices.

Inflation is also affecting Japan, with producer prices reaching their highest level in roughly 35 years. However, many companies are not reflecting the higher costs in their product prices, leaving the year-on-year rise in the consumer price index below 1%.

The CPI growth is currently pushed down by 1.5 percentage points by the lowering of mobile phone fees.

Yasunari Ueno, chief market economist at Mizuho Securities Co., said that the CPI growth “will be above 1% by April” when the phone fee plunge stops affecting the index.

However, Ueno said that it will be difficult for the BOJ to shift away from its monetary easing as prices in Japan are unlikely to reach its 2% inflation target.

Meanwhile, the Bank of England decided on an interest rate hike late last year, while the U.S. Federal Reserve expects to raise rates about three times this year.

If the yen becomes weaker due to wider differences in Japanese and foreign interest rates, the prices of imports such as crude oil and other materials may increase further.

There are fears of inflation having a negative impact on the economy if wages do not increase as well, as the burdens on households will become heavier and chill economic activity.

The new omicron coronavirus variant is also a cause of uncertainty that is making the BOJ’s policy decisions tricky.

The Japanese government is expected to pick a successor to Kuroda after the election for the House of Councillors, the upper chamber of parliament, in the summer. Some BOJ watchers believe that the successor is likely to be a former BOJ official, as Kuroda, who is from the Finance Ministry, will have served as governor for a total of 10 years.

Likely candidates include BOJ Deputy Gov. Masayoshi Amamiya and Hiroshi Nakaso, former BOJ deputy governor and now chairman of Daiwa Institute of Research Ltd.

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