The Bank of Japan judged that the underlying inflation rate had reached 2%. This came 14 years after the target was set in 2013. The Bank is said to be entering a phase of shifting policy management toward price stability, although challenges remain in creating a virtuous cycle of wages and prices.
At its monetary policy meeting on 30 October, the Bank of Japan said it had judged that the underlying inflation rate, which it considers important, had reached its 2% target. This means the target was reached 14 years after it was set in 2013.
However, external factors such as surging energy prices and yen depreciation have had a significant impact, and it has been pointed out that a virtuous cycle of wages and prices has not yet been achieved. To ensure stability in people’s livelihoods, monetary and fiscal policy will need to be managed appropriately while keeping inflation in check.
The Bank is expected to move into a phase in which underlying inflation becomes established at around 2%, but risks remain that higher crude oil prices and yen depreciation will push prices up. The view has been expressed that rate hikes will need to continue.
Interest burdens, including on mortgages and loans to small and medium-sized businesses, remain high. Although wage increases are progressing, their impact varies by industry and age group, and attention is also considered necessary regarding the government’s fiscal management and policy response.