Davos: Japan is nearing the phase where its monetary policy easing can be stopped, its minister for trade and industry said on Wednesday, hours after the Bank of Japan (BOJ) maintained ultra-low interest rates.
“Of course, monetary policy is going to be normalized in the future but until we can see a clear path in the future, I understand the BOJ is going to maintain its current policy,” Minister of Economy, Trade and Industry Yasutoshi Nishimura told a panel at the World Economic Forum’s annual meeting in Davos.
Nishimura said various government policies had allowed inflation to rise more slowly than in other countries.
“But from now on, when real investment is made and wages increase and the economy gets going... monetary easing can afford to be stopped in the future. We are of course coming to that phase, nearing that phase,” Nishimura added.
The BOJ earlier in the day defied market expectations it would phase out its massive stimulus programme in the wake of rising inflationary pressure, keeping a bond yield cap it was struggling to defend in place.
Following the decision Bank of Japan Governor Haruhiko Kuroda said in Tokyo that a path is becoming visible in which both wages and prices are gradually rising, stressing the importance of encouraging companies to raise pay.
Nishimura said he hoped the country’s businesses will hike wages by 5 per cent “plus something extra” this year, adding that he hoped that would lead to moderate demand-driven inflation in Japan rather than prices rising through cost-push pressure.
The comments from Nishimura and Kuroda come as top companies in the world’s third-largest economy are gearing up to offer their biggest wage increases in decades, even as many small firms that provide most of the country’s jobs are unlikely to follow suit.
