Since the 1990s, Japan has been trying unsuccessfully to get its inflation above the 2% target, until now. The fall of the yen to a 24-year low at its crossroads with the dollar and the increase in the prices of raw materials have made the country’s inflation rate finally reach 2.4%. Now, the Bank of Japan is considering joining its international counterparts – such as the ECB, the Bank of England and the US Federal Reserve (Fed) – with an increase in interest rates, which are currently at -0, 1%, so that inflation does not go beyond. A strategy that some see as a mistake, since the entity would be wasting a unique opportunity to increase the impact of its monetary easing policy.
The one known as has been characterized by very low growth, the risk of deflation, a high employment rate and an aging population, as well as zero or negative interest rates and extremely high debt levels. .
The problem is that although inflation has risen to 2.4%, core inflation remains weak. In addition, there has not been a transmission of the rise in prices to the increase in wages. For this reason, Goushi Kataoka, who recently left the Board of the Bank of Japan and is currently PwC Consulting’s chief economist in the country, believes that any change in the bank’s strategy could have serious consequences for the nation’s economy. .
In an interview with the Financial Times, Kataoka says that keeping the yield on debt bonds at zero while the rest of the central banks are betting on raising interest rates is crucial to boosting the aforementioned effect of his monetary easing policy.
However, it is aware of the limited scope of such policies. In that sense, he points out that what the Government of Japan should do is offer bolder tax incentives for companies to increase the salaries of their employees. Likewise, he believes that additional stimulus measures are necessary to allow companies and households to offset the effects of the weak yen and the increase in the price of imports.
In July, , mainly due “to the increase in the costs of energy, food and durable goods”. The entity also increased its estimate of the rise in the consumer price index (CPI) by four tenths, as well as five tenths downward, to 2.4%, its estimate of economic growth for the year ending on 31 December. March 2023. Despite the worsening of its short-term forecasts, the Japanese central bank expects the Japanese economy to recover in the medium-long term, in anticipation that this price rise will be temporary and its influence “wine”.
Facebook Comments
Disqus