Bank of Japan board member Toyoaki Nakamura said on Thursday that monetary policy tightening while the output gap is negative would "weigh heavily" on the economic activities of both households and companies. He noted that, in the case of cost-push inflation, it is better to respond with targeted measures than to shift policy to limit demand.
Nakamura predicted that inflation in Japan will accelerate due to energy costs, followed by increasing at a narrow pace later. Comparing the domestic situation to foreign economies, he stated that Japan's prices are rising more slowly because of slow wage growth, but that "there appears to be a shift in long-held mindset in Japan that prices won't rise much." He stressed that the BoJ must continue the policy of monetary easing and reach the 2% inflation target in a sustainable way.
