Bank of Japan Deputy Gov. Masazumi Wakatabe on Thursday denied speculation of early monetary tightening, saying the nation’s economy is just beginning to recover from the COVID-19 pandemic.
The comment came as some market participants and economists expect the Japanese central bank to follow the footprints of the Federal Reserve, which is expected to raise rates in March amid growing inflation.
“It is definitely too early for the bank to start tightening monetary policy when the target has not yet been achieved as this could hinder the economic recovery,” Mr. Wakatabe said in a speech.
He said the central bank would continue its current monetary easing program until medium- to long-term inflation expectations are anchored at its 2% target. Hitting 2% inflation just for one month or a few months isn’t enough for the BOJ to start tightening, he added.
Although there are some signs of inflation in Japan, price increases in the services sector are still muted, he said. In its latest outlook report, the central bank’s policy board expects consumer prices to rise about 1% in the year ending March 2024.