Wed, 01 Dec 2021

TOKYO, Oct. 14 (Xinhua) -- A board member of the Bank of Japan (BOJ) has said that although Japan's economy would likely see a pent-up demand, for the time being the central bank would not reduce the monetary stimulus to cope with accelerating inflation, local media reported Thursday.

Asahi Noguchi, a supporter of reflationary monetary policy, said in a speech that he expected the economic recovery in Japan would be more pronounced at the end of this year or later with the vaccination progressing and the impact of COVID-19 waning gradually.

Some countries have seen inflation accelerating in line with the reopening of their economies, and the U.S. Federal Reserve was expected to start tapering stimulus as early as November.

Noguchi said, "In the case of Japan, reducing monetary easing in response to rising inflation as some central banks are about to do will not be an option for the time being," adding the reason was that Japan was yet to have a more than 2 percent inflation rate, a target rate of BOJ.

Japan's core consumer price index excluding volatile fresh food items was flat in August, representing a current inflation level still being far from the BOJ goal.

Due to low inflation in Japan before the spread of COVID-19, the pace of growth in wages and inflation would be less likely as rapid as in some other countries, even if some of the "excessive savings" accumulated during the pandemic went to spending, Noguchi said.

According to Noguchi, even if the spread of COVID-19 was contained, BOJ would keep monetary easing for a substantial amount of time.

"In Japan, the challenge is to keep the momentum for an expansion in pent-up demand going through continued monetary easing so that this momentum will lead to our efforts to achieve 2 percent price stability target." he said.

In addition, he warned that supply chain disruptions due to surging COVID-19 cases in Southeast Asia hitting automakers might lead to downside risks to the economy.

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