The Governor of the Bank of Japan, who was nominated by the Japanese government this month, Kazuo Ueda, expects the level of inflation to begin to decline, which reached its highest level in decades, to exceed 4% at the beginning of this year.
He added that there is no need to raise the interest rate more than it is and that monetary policy should be eased and “the current period of inflation is the peak.” Note that Japan’s monetary policy is currently at an interest rate of 0.5%.
He attributed the rise in prices in Japan to external factors, including the rise in energy prices, which in turn led to a rise in the price of commodity imports. Yida predicts that inflation will fall below 2% in the coming period. These statements affected the Nikkei index, as the Japanese yen reacted slightly positively against the dollar.
He said during his speech to parliament that he would “make his five-year term as governor of the Bank of Japan to achieve price stability”, and it is still too early to discuss an exit from the quantitative easing policy.
He promised that if the goal of reducing inflation to less than 2% is achieved, monetary policy will return to normal, which may include raising interest on the reserves that commercial banks have at the Bank of Japan.