BOJ Gov. Ueda Says Important to Nurture Sustainable Inflation

By Megumi Fujikawa

OSAKA--Bank of Japan Gov. Kazuo Ueda said Monday that he has seen some positive signs of sustainable inflation, but he isn't ready to unwind monetary easing yet.

"Japan's economy has entered a critical phase in terms of realizing a virtuous cycle between wages and prices, and what is important at this phase is to carefully nurture the buds of change in the economy," Ueda told business leaders in Osaka.

The central bank's baseline scenario is that the virtuous cycle between wages and prices would intensify as the main factor pushing up prices is expected to shift to stronger wages from higher import costs, he said.

"Changes have started to be seen in some aspects of firms' wage- and price-setting behavior, but there are extremely high uncertainties as to whether these changes will become widespread," Ueda said. He reiterated that the central bank will patiently continue monetary easing under the current framework of yield curve control.

The BOJ's policy board on Friday decided to leave its interest-rate targets unchanged, including its 1% cap on the yield of 10-year Japanese government bonds, which was raised from 0.5% at the previous meeting in July. It also maintained short-term rates at minus 0.1%.

Speculation has been growing over a policy change by the BOJ amid rising inflation. The 10-year JGB yield rose to a decade-high of 0.745% last week.

Ueda said the central bank would consider scrapping yield curve control if it becomes confident about achieving its price goal, although there is still some distance to go until reaching such a phase.

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

(END) Dow Jones Newswires

September 25, 2023 04:47 ET (08:47 GMT)

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