TOKYO: Bank of Japan Governor Toshihiko Fukui reiterated the central bank's commitment to its current policy framework yesterday, saying it would maintain quantitative easing until deflation subsided.
“We will persist with our easy monetary stance under current conditions in which year-on-year changes in consumer prices are slightly negative,” Fukui told a parliamentary committee, where he was submitting the central bank's semi-annual report.
The BOJ has vowed to keep its quantitative easing policy, under which it floods the market with liquidity, until year-on-year changes in the core consumer price index stabilise above 0%. The CPI has been falling for about six years.
Fukui said the Japanese economy would likely emerge “from currently flat conditions in the not-so-distant future”, but that such a recovery would not necessarily bring an end to deflation.
“Consumer prices these days tend not to react to economic recovery because of increased productivity and lower labour costs in the corporate sector,” he said.
Consumer prices were also likely to remain in a slightly deflationary trend for a while partly due to cheaper utility charges, he said.
Consumption, however, may be on the rise, he said.
“Employment conditions are improving and there are clear signs that falls in wages are bottoming. It is highly likely that personal spending is heading for a gradual rise,” he said. – Reuters