Bank of Japan:

 Article Source: https://mainichi.jp/english/articles/20220203/p2g/00m/0bu/051000c

Article:

TOKYO (Kyodo) -- It is "too early" for the Bank of Japan to tighten monetary policy as the economy's recovery from the coronavirus pandemic has just begun, Deputy Governor Masazumi Wakatabe said Thursday.

Wakatabe's statement came as some financial market players have suggested that the BOJ should move toward tightening monetary policy before achieving its 2 percent inflation target to keep in step with U.S. and European central banks, which are shifting toward normalization to tamp down prices.

Ideas:

Yes its way to early for the Bank of Japan to tighten monetary plolicy, even with the inflation increasing in Japan. 

If anything the Bank of Japan should make sure its strategies are enough to overcome any situations that might occur because of the Ukraine situation.

The Bank of Japan must think about Japan and its unique situation and not follow what the EU or the US are doing.

Japan is a long way from reaching 2 percent inflation even at the latest estimate of 1.1 percent.

But at the same time, the BOJ needs to be concerned about rising energy prices, rising food and supermarket prices and find strategies to cool those sectors down without tightening monetary policy.

Article:

"Given the current situation in which Japan's economy has finally started to pick up from the pandemic, it is definitely too early for the bank to start tightening monetary policy when the target has not yet been achieved as this could hinder the economic recovery," he said in a speech.

During an online meeting with business leaders in Wakayama Prefecture, he also said reaching the target means that the year-on-year growth rate of the consumer price index should be at 2 percent or more for a certain period, not "merely for one month or a few months."

Ideas:

The most important idea, as much as possible, if for the full recover of all sectors in the Japanese economy and society.

But that might not be possible for the international tourism sector just yet, but the BOJ and the Japanese government should do all it can to ensure as many sectors, including the battered services sectors can get to some kind of new normal.

Yes it should be a sustained recovery and not just the idea of 2 percent. but a sustained recovery for as many sectors as possible.

The BOJ's 2 percent goal might be doable as this time or in the near future. But if the BOJ can get the rest of the economy back to some kind of sustained growth that would be a start, and then if companies increase the salaries of their employees that will go a long way to maybe reaching the 2 percent target.

Article:

Japan is still struggling to achieve the target, but some economists predict the core CPI could increase toward 2 percent in the coming months as the impact fades of cuts in mobile phone fees that started last spring and raw material costs remain high globally.

As for one of the major reasons behind the BOJ setting the inflation target at 2 percent, Wakatabe said, "If inflation is zero percent, temporary factors can easily lead to deflation."

He said the BOJ is continuing with monetary easing not just for the sake of trying to raise prices but to create a "virtuous cycle" to increase "wages, income, and employment, thereby boosting business activity."

Ideas:

The BOJ has been struggling since around 2014 to reach the 2 percent target without much success yet.

And then when the 2019 sales tax increase came into effect on Oct. 1 it became even more difficult as Japanese consumers are very sensitive to price increases and a sales tax increase is nothing more than an increase in prices.

And then the pademic hit which has made it even more of a challenge for the BOJ to reach its goal. 

So maybe now as the pandemic might be slowing down and there is maybe some light at the end of the long 2 year tunnel the BOJ might be able to finally see consumer demand and inflation begin to get near the 2 percent level. It exactly there but even 1.5 or 1.75 would be significant.

So with Prime Ministers's ideas and the BOJ's ideas maybe Japan can begin to see some significant changes that are positive for the Japanese economy in the future.

Have a nice day and be safe!