Will Inflationary Pressures Help Japan’s Economy Going Forward?
With several leading economies getting concerned about inflationary pressures building up while they work their way towards recovery from
With several leading economies getting concerned about inflationary pressures building up while they work their way towards recovery from the coronavirus crisis, a BOJ policymaker has cautioned about a similar situation in Japan as well. A board member at the Japanese central bank, Seiji Adachi, has hinted that it could be a potential opportunity for companies in the nation to hike prices and help the BOJ come closer to its 2% target for inflation.
For several years now, well before the coronavirus pandemic struck, the world’s third largest economy has been battling deflation and weak price rise, forcing the BOJ to have one of loosest monetary policies among leading nations worldwide. Adachi expressed hope that pent-up demand among consumers could see them being willing to spend more even as businesses are forced to increase prices as they implement additional measures to ensure customer safety.
In a recent speech made earlier in the day, Adachi noted, “This could offer firms a chance to charge more for higher quality services. A post-pandemic world may offer a big chance to achieve our 2% inflation target”, which could help boost Japan’s chances of overcoming the crisis driven not only by the pandemic but one that has been weighing on it for several years now – that of the risk of deflation.
On the topic of the current economic conditions, Adachi agreed that the BOJ needs to stick with its monetary easing and negative interest rates to help Japan’s economy through the pandemic-driven downturn. He also maintained that the central bank should monitor changes in corporate funding when deciding on whether to continue with such measures beyond September this year.
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