Japanese PM Kishida Stresses Importance of Maintaining Accommodative Monetary Policy

Japanese Prime Minister Fumio Kishida emphasized on Thursday the necessity for the central bank to uphold accommodative monetary conditions, underscoring the government’s commitment to supporting economic recovery and defeating deflation.

In a news conference, Kishida affirmed that the government would sustain close coordination with the Bank of Japan (BOJ) to ensure continued wage growth and facilitate a comprehensive departure from deflationary pressures.

Kishida characterized the current period as a historic opportunity for Japan to fully emerge from the grips of deflation, noting that while progress has been made, there remains work to be done.

While acknowledging that some may anticipate a formal declaration of Japan’s complete departure from deflation, Kishida emphasized that the journey is only halfway complete, stressing the importance of the government’s role in fostering an environment conducive to sustained economic growth.

A pivotal aspect of Kishida’s agenda is to encourage businesses and households to transition away from a deflationary mindset, with a particular focus on ensuring that wage increases outpace inflation rates in the coming years.

The recent policy shift by the BOJ, which concluded eight years of negative interest rates and other unconventional measures, signifies a significant departure from its longstanding strategy of stimulating growth through massive monetary stimulus.

When questioned about the timing of potential interest rate hikes by the BOJ, Kishida refrained from providing a direct response but conveyed his hope that the central bank would consider the government’s overarching objective of fully eradicating deflation in guiding its monetary policy decisions.

Kishida further disclosed that he had conveyed to BOJ Governor Kazuo Ueda during a recent meeting that it was appropriate for the central bank to transition to a new phase in monetary policy, aligning with the government’s vision for comprehensive economic revitalization.