Tsuyoshi Kataoka, who stepped down as a member of the Bank of Japan deliberation committee in July after his term expired, believes the time may come when the BOJ decides whether it should take steps to normalize its monetary easing policy to mid next year at the shortest. .
In an interview on the 9th, Kataoka said: “If nominal wages are expected to continue growing by 2-3% as a result of the move to pass higher commodity prices, there is a possibility that we will be in. able to confirm a price increase accompanied by wage increases. ‘ he said he said normalization would be “in the middle of next year if an early decision is made” and added, “It’s a tight path and I think it’s close to a miracle.”
“We are starting to see a virtuous, albeit gradual, cycle as companies begin to pass on rising commodity prices onto prices and, as a result, wages gradually increase,” he said. “There is a change in the situation. There are expectations that the conventional perception will change significantly, such as the deflationary perception.”
Kataoka, appointed chief economist at PwC Consulting in August, is a reflationary active in monetary easing. He continued to vote against monetary policy meetings, saying it is desirable to further strengthen monetary easing by lowering short-term and long-term interest rates.
The year-on-year rate of increase in consumer prices has exceeded the 2% target set by the Bank of Japan for four consecutive months through July and the rate of growth is expanding. The Bank of Japan insists on continued monetary easing, arguing that the current price increase is unsustainable. It will increase to an average of 2.3% in FY2022, but is expected to slow to 1.4% in FY23 and 1.3% in FY24.
According to Kataoka, it is easy to predict that the rate will exceed 3% after the fall, when the impact of the reduction in mobile phone costs completely fades. An important point in the conduct of monetary policy is whether the downward trend in prices will manifest itself in the first half of next year, as predicted by the Bank of Japan.
Mr. Takeshi Kataoka
Source: Bloomberg
Regarding the strong dollar and the weak yen for the first time in about 24 years, he explained: “The essence is the strong dollar and the Japanese authorities are not causing the yen to weaken.” He said the Bank of Japan raising interest rates would not solve the problem, saying, “If we change monetary policy, the risk that it could lead to a deterioration of the current economy will become evident.”
Among the concerns about external demand, he said: “The best place to start is to firmly support domestic demand through fiscal policy.” The global economic measures that the government intends to formulate in October state that “the gap between supply and demand is currently between 16 trillion and 17 trillion yen, and this will be one of the criteria”.
What the next president, who will take office next April, should do is carry on the legacy of Kuroda, quickly reach and stabilize the 2% target, and move on to the next stage appropriately. He said he didn’t want people to give up just because they couldn’t reach their inflation target and that lowering the target “would mean defeat and completely lose hope of an economic boost.”
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