Bank of Japan (BoJ) Governor Masaaki Shirakawa said consumer prices will gradually rise in the coming years, but that has not kept a group of ruling party lawmakers from demanding a higher price goal and further monetary stimulus in March.
Shirakawa said that while consumer inflation is currently flat, it will gradually pick up as the economy recovers due to a rebound in global growth and domestic spending for reconstruction from last year’s tsunami.
“We will continue with monetary easing until consumer inflation of 1 per cent is in sight,” he told a parliamentary committee on Friday, adding that price rises driven by temporary factors such as a spike in crude oil costs alone would not trigger a reversal of the bank’s ultra-loose policy.
He also stressed that while monetary policy eventually determines the long-term trend for prices, boosting central bank fund supply alone would not immediately push up prices and that deregulation and other measures to lift productivity were also needed.
The yen fell and Tokyo stock prices rose after the BOJ increased asset purchases by 10 trillion yen ($123 billion) and set an inflation goal of 1 per cent in the face of political pressure, signalling a more aggressive monetary policy.