Image: Reuters Berita 24 English - Thursday, Bank of Japan Deputy Governor Masayoshi Amamiya said that monetary policy needs to stay very lo...
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| Image: Reuters |
Berita 24 English - Thursday, Bank of Japan Deputy Governor Masayoshi Amamiya said that monetary policy needs to stay very loose because nobody knows if wages will go up enough to make up for the rising cost of living.
Amamiya said in a speech that even though household spending is going up again, wages need to go up faster than inflation for consumption to keep going up and help Japan's economy get out of the slump caused by the pandemic.
"Japan's economy still hasn't gotten back to where it was before the pandemic," he said. Rising global commodity prices are hurting the country's income because it imports so much fuel and raw materials.
"The foundations for an economic recovery are still weak, and there is a lot of uncertainty about what will happen to wages. Because of this, we need a flexible monetary policy to help the economy "Amamiya said.
The core consumer price index (CPI), which doesn't include the volatile costs of fresh food but does include those of energy, rose 2.2% from a year earlier to June. This was the third straight month that it was higher than the central bank's target of 2%.
Amamiya made it clear that temporary rises in inflation caused by things like higher gas prices outside of Japan will not be enough to convince the BOJ to stop its massive stimulus.
"To reach our price goal, consumer inflation must average 2 percent over the business cycle, not just go up to that level temporarily because of things like rising energy import costs," he said.
The rising cost of living hurts households the most because companies are still hesitant to raise wages because they don't know how their business will do in the future.
Inflation-adjusted real wages, which are a key measure of consumers' buying power, fell 1.8% from a year ago. This was the biggest drop from one year to the next in almost two years.
