Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Japan may see inflation perk up in post-COVID era, says BOJ board member

Published 06/01/2021, 10:27 PM
Updated 06/02/2021, 02:50 AM
© Reuters. FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of the Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

© Reuters. FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of the Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

By Leika Kihara

TOKYO (Reuters) -A post-coronavirus pandemic world could offer an opportunity for Japanese firms to raise prices and help the central bank achieve its 2% inflation target, Bank of Japan board member Seiji Adachi said on Wednesday.

But there was little the BOJ can do besides "patiently" sustaining its massive stimulus, Adachi said, offering the most candid comment to date by a BOJ policymaker on the central bank's dwindling ammunition to prop up growth and inflation.

"Personally, I can't think of any new tool to directly push up prices. If there were one, we would have deployed it already," Adachi told a news conference.

While restaurants and hotels may need to continue shouldering the cost of steps to prevent the spread of the virus, consumers may become more willing to pay more for value-added services, Adachi said in a speech delivered before the news conference.

"This could offer firms a chance to charge more for higher quality services," said Adachi, a former market economist.

"A post-pandemic world may offer a big chance to achieve our 2% inflation target," if retailers are able to charge more for their services unlike in Japan's past periods of deflation, he added.

The BOJ currently caps long-term interest rates around zero, and buys huge amounts of government bonds and assets to achieve its elusive 2% inflation target.

It also put in place last year a series of steps to channel money via financial institutions to firms hit by the pandemic.

Adachi said the BOJ must take into account changes in corporate funding conditions in deciding whether to extend the pandemic-relief programme beyond the current September deadline.

While years of aggressive easing helped pull Japan out of deflation, it was difficult to prop up inflation to the BOJ's target just by ramping up an already massive asset-buying programme, Adachi said.

© Reuters. FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of the Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

The BOJ may need to respond if the yen spikes on expectations the U.S. Federal Reserve will taper its asset purchases, though it was hard to predict how markets would react to any such move by the Fed, Adachi said.

"Whether the BOJ will respond would depend on whether (the Fed's tapering) triggers a yen rise," he said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.