Fumio Kishida backs BOJ’s ultra-easing policy despite plummeting yen

Fumio Kishida has voiced support for the Bank of Japan’s ultra-loose monetary policy, even as the yen plummeted to its lowest level in real terms since the 1970s.

In an interview with the Financial Times, Japan’s prime minister said the central bank needs to maintain its policy until wages rise, urging firms that have raised prices to also raise wages.

Kishida He ruled out speculation that he would end the BOJ governor’s term early or apply political pressure to end negative interest rates, and said he would continue to “cooperate closely” with Haruhiko Kuroda.

“At the moment, we are not thinking of shortening his term,” said Kishida, referring to his 10-year term as governor Kuroda, which ends next spring. “We will look into the economic situation in April next year and consider selecting the right person for the right job,” he said.

how severe Japan’s economic challenges In contrast to other advanced economies struggling to protect their citizens from runaway inflation, Kishida said the country needed wage increases, not wage restraints.

The government will prepare measures to help firms raise salaries even if they pass on higher input costs, Kishida said. His comments come at a time of heightened public concern over the rising cost of living and the economic crisis. Prime Minister’s popularity plummets.

The yen, which had been trading flat on Tuesday morning, fell 0.1% against the dollar to 145.83 yen on Kishida’s comments, nearing the low of 145.90 touched last month, prompting Japanese officials to intervene. and strengthened currency.

“By passing on higher prices, we hope to give companies more freedom to raise wages,” Kishida said. “Historically, wage increases were seen as a cost factor, but now companies need to invest in human resources for the growth of the economy and the companies themselves.”

of Bank of JapanJapan’s policy stance, which has pushed the yen to a 24-year low against the dollar, will be offset by government measures to combat inflation and use the weaker yen to boost exports and tourism.

Prime Minister’s comments Circle And after nearly a decade of unwavering commitments to ultra-loose policies, global turmoil has fueled speculation that the Bank of Japan may finally turn a blind eye.

Shortly before Kishida spoke to the FT, the yen fell to 145.60 against the dollar, falling within 0.30 against the dollar. Japanese authorities intervened last monthAnalysts warn that such a $20 billion effort to tackle the yen’s strength would have little effect as long as interest rate differentials between Japan and the United States continue to widen.

Japan faces the same pressures as the US and Europe from rising global energy and food prices. However, headline inflation remains relatively low at 3%, with little shift from price increases to wage increases. Rising energy prices were partially offset by long-term contracts for Japan’s bulk imports of liquefied natural gas.

The Bank of Japan has argued that underlying consumer demand in the Japanese economy is weak and forecasts inflation to fall below 2% in the next financial year.

Businesses, especially small businesses that employ 70% of their workforce, are struggling to pass on higher costs to consumers, squeezing profits and making it harder to raise wages.

After decades of intermittent deflation, economists say the global energy crisis has forced firms to raise the prices of their products, creating pressure for workers to demand higher wages. He said Japan may be on the cusp of a historic turning point.

“It’s difficult to judge what level of inflation is appropriate,” said Kishida. “However, we strongly feel that unless we see wage increases to match rising prices, we will not be able to maintain a sustainable economy or protect people’s livelihoods.”

https://www.ft.com/content/e1525dc4-39f4-48f0-b8bb-fc462fe06676 Fumio Kishida backs BOJ’s ultra-easing policy despite plummeting yen

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