TOKYO — Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Thursday he expects consumer prices to start climbing again on rising energy costs, indicating global inflationary pressure is spreading even to a country long struggling to shake off deflation risk.
Japan’s core consumer prices halted a 12-month run of decline in August, as energy costs offset the impact of cuts in mobile phone fees as well as weak consumption blamed on the coronavirus pandemic.
“Core consumer inflation is hovering around 0% but we expect it to turn slightly positive reflecting rising energy prices,” Kuroda told a quarterly meeting of the BOJ’s regional branch managers.
“As the economy continues to improve and the impact of mobile phone fee charges dissipate, consumer inflation will gradually accelerate,” he said.
Kuroda maintained his optimistic view on the economy, saying it is likely to recover as the pandemic’s damage fades thanks to robust external demand and massive fiscal and monetary support.
Inflationary pressure has emerged as a key risk for many countries across the globe, complicating the timing for when policymakers can reduce the massive monetary stimulus they deployed to combat the pandemic’s initial hit.
Japan has not been immune to rising raw material costs with wholesale inflation hitting a near 13-year high of 5.5% in August. But companies have been slow in passing on the rising costs to households due to weak consumption.
The BOJ will issue a quarterly report analyzing regional economies later on Thursday, which will be among factors its board will scrutinize at policy meeting on Oct. 27-28. (Reporting by Leika Kihara and Tetsushi Kajimoto; Editing by Christopher Cushing)