The Bank of Japan (BOJ) is making progress toward its inflation target but must proceed cautiously, central bank Governor Kazuo Ueda said on Monday, as another Japanese monetary policymaker welcomed the end of negative rates.
The Japanese economy “has made progress moving away from zero inflation, while inflation expectations have increased”, noted Kazuo Ueda at a conference on central banks organized by the BOJ .
To sustainably achieve the 2% inflation target, the BOJ “will move forward cautiously, as is the case for other central banks with an inflation target,” added the governor.
“Many of the challenges we face have also been faced by our colleagues, but the complexity of some of them is unique to our situation,” explained Kazuo Ueda.
Estimating the neutral rate for the Japanese economy is particularly difficult, the governor underlined, after thirty years of almost zero or even negative rates.
“Without a significant rate movement, it is difficult to estimate the economy’s response to interest rate changes,” he said.
At the conference, Vice Governor Shinichi Uchida said the end of the battle against deflation was in sight, but that anchoring inflation expectations at 2% remained a “big challenge”.
Conditions in labor markets have changed in a structural and irreversible way, helping to resolve one of the root causes of deflation, excess labor, detailed the monetary policy official.
“We are back in a conventional monetary policy framework seeking to achieve stable price dynamics around 2% through policy rate adjustments, which means we have exited the period of zero interest rates” , he added.
The BOJ raised its rates in March after eight years of negative rates, judging that inflation was rising sustainably to its 2% target.
(Report by Makiko Yamazaki and Satoshi Sugiyama, French version Corentin Chappron, edited by)
 – 05/27/2024 at 08:06){kind=link}