SINTRA, Portugal (Reuters) -Bank of Japan (BOJ) Governor Kazuo Ueda said on Wednesday the central bank would see good reason to shift monetary policy if it became “reasonably sure” that inflation would accelerate into 2024 after a period of moderation.
The BOJ expected inflation to slow “for a while” due to the fading effect of past rises in import prices, before picking up again into 2024, Ueda said at a seminar hosted by the European Central Bank.
“But we are less confident about the second part,” he said, pointing to uncertainties over whether inflation would accelerate again after a period of moderation.
“If we become reasonably sure the second part will happen, this will be good reason to shift policy,” he said on what could prompt the BOJ to phase out its massive stimulus.
While headline inflation was above 3%, the BOJ was keeping monetary policy easy because underlying inflation remained below the central bank’s 2% target, Ueda said.
Wage growth was also an important determinant in gauging the outlook for inflation, Ueda said, adding that wages must rise well above 2% consistently for inflation to stably hit that level.
“There’s still some distance to go” in sustainably achieving 2% inflation accompanied by sufficient wage growth, he said.
(Reporting by Balazs Korani and Francesco Canepa in Sintra, Leika Kihara in Tokyo; Editing by Alex Richardson)
