Boj’s Ueda calls for vigilance to the risk of food enlargement

By playing Kihara

TOKIO (Reuters) -The Bank of Japan must be alert to the risk of high food prices that can raise the basic inflation that is already near its 2 % target.

UEDA said in a letter hosted by BOJ that interest rates keep interest rates low with inflation expectations, or the public perceived the movements of future prices, between 1.5 % and 2 % – the highest level in 30 years although it is still less than its 2 % goal.

But the high renewable prices in food prices, especially 90 % in the price of rice, is not only a title that is not limited to inflation, but is often affected by improvements in the economy and the narrow job market.

“Our basic view is that the effects of inflation of food prices are expected to fade,” he said.

“However, given that basic inflation is closer to 2 % of a few years ago, we need to be careful about how food prices affect the basic inflation,” he added.

Notes come at a time when BOJ is closely monitoring the economic risks of high American definitions in addition to local inflationary pressures, in judging the extent of resumption of high interest rates.

Although BOJ has reduced its expectations due to uncertainty in commercial policy, it expects the basic inflation to move gradually towards its 2 % goal during the second half of its expected horizon, which will continue during the 2027 fiscal year, UDA said.

He said: “To the extent that the data received allows us to obtain more confidence in the baseline scenario, with the improvement of economic activity and prices, we will set the degree of cash dilution as needed” by raising prices.

The challenges of the display side

The basic inflation in Japan was 3.5 % in April, which is faster in the fastest annual pace in more than two years due to an increase of 7 % in food costs, raising the chances of another rate of increase this year.

But the central bank indicated the need for a slowdown in raising prices to ensure that Japan sees inflation to 2 % supported by strong home demand and raising fixed wages, instead of high costs of raw materials.

High food prices significantly, highly highly imported, complicated the BOJ rate decisions by simultaneously hurting consumption and maintaining the main inflation higher than its goal.

While central banks usually look through the effect of the shocks of the display on inflation, this approach was criticized by academics, as the US and European central banks were forced to raise their rates strongly after holding them in the rise in inflation caused by Russia’s invasion of Ukraine.