Japan’s economy is still showing some weakness due to the COVID-19 pandemic, but it will continue to recover despite a hit from rising commodity prices, Bank of Japan Governor Haruhiko Kuroda said on Monday.
Higher energy and commodity prices will accelerate Japan’s inflation in the coming months, with the core CPI excluding non-perishable fresh food likely to rise “significantly,” Kuroda said at a meeting of the bank’s branch managers.
Bank of Japan Governor Haruhiko Kuroda attends a meeting with heads of BOJ branches at the central bank’s headquarters in Tokyo on April 11, 2022. (Kyodo) ==Kyodo
However, he warned that there are “extremely high uncertainties” about how the crisis in Ukraine will affect commodity prices and the Japanese economy, the governor said.
“Japan’s economy has recovered as a trend, although some weakness has been seen in part, mainly due to the impact of COVID-19,” Kuroda said.
“As downward pressure on service consumption and the impact of supply constraints ease, reviving external demand, accommodative monetary policy and the government’s stimulus packages are likely to help the Japanese economy recover despite being hit by rising commodity prices,” he added added.
At present, Japan has no COVID-19 restrictions after lifting quasi-emergencies last month, but Prime Minister Fumio Kishida has warned of a resurgence in infections.
Soaring fuel and commodity prices since the Russian invasion of Ukraine that began in late February have cast a shadow over resource-poor Japan.
Business sentiment, both major manufacturers and non-manufacturers, deteriorated for the first time in seven quarters in the latest Tankan survey for March.
The yen’s rapid depreciation, particularly against the US dollar, has pushed up import costs, prompting some business leaders to warn of its negative impact on the economy.
The yen’s recent depreciation comes amid the prospect of divergent policy paths for the BOJ, which is still a long way from its 2 percent inflation target, and the US Federal Reserve, which has entered a cycle of interest rate hikes to combat inflation, which is spiraling approached 8 percent in February.
Kuroda said commodity inflation is unlikely to prompt the BOJ to change monetary policy as it will not last long. But he told parliament the yen’s fall had been “quite quick” in its strongest warning yet since it hit a six-year low in March.
Japan’s core CPI rose 0.6 percent in February as higher fuel costs outweighed the burden of sharply lower mobile rates.
Later in the day, the BOJ will release its quarterly “Sakura” report on the regional economy.
Bank of Japan Governor Haruhiko Kuroda (2nd from left) attends a meeting with heads of BOJ branches at the central bank’s headquarters in Tokyo on April 11, 2022. (Kyodo) ==Kyodo
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