“The economy is gradually recovering,” BOJ Gov.
He acknowledged uncertainties remain, including overseas inflation and foreign exchange fluctuations. But he reaffirmed his view that additional hikes will be needed if the economy remains stable.
“Our basic thinking has not changed,” he added, stressing the importance of "the positive cycle” of higher prices and wages.
Recent price data show inflation hovering at about the central bank’s 2% target. Government data released hours before the decision showed consumer prices, excluding volatile food prices, rose last year at an average rate of 2.5%, marking the third straight year of increase.
The consumer price index, excluding food, for the month of December alone showed a 3% rise.
Another long-term concern was wage growth. Recent data show Japanese workers are gaining better wages and are generally set to receive solid pay raises in their upcoming annual union negotiations.
The labor ministry adjusted its wage data for November to a rise of 0.5%, instead of a decline, helping to support the
Share prices fell immediately after the announcement, but the benchmark
The
A rate rise in July last year sent stock prices tumbling. The bank is also watching for market reactions to the policies of
Ueda said that the responses to the rate hike were muted, suggesting the central bank's decision was on target.
The
Japan’s longtime ultra-lax monetary policy was meant to wrest the economy out of deflationary tendencies and boost growth. Deflation stagnates growth, as companies invest less, cut back on wages and people hold back on spending.
Japan’s stance is at odds with the loosening trends adopted by the
“Second, the absence of immediate, aggressive trade protectionism from
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