Bank of Japan vows to stick with stimulus

[BY_PLACE][TOKYO] [/BY_PLACE]Bank of Japan Governor Haruhiko Kuroda says monetary stimulus must continue as the country's different inflation dynamics compared with the US keep his price goal out of reach.

"We are not in a position at the moment where inflation is going to reach 2 per cent in a stable manner," Kuroda said on Thursday (Mar 17), responding to questions by a lawmaker in parliament, just hours after the Federal Reserve raised interest rates to help tame US prices. The Fed's first rate increase since 2018 and its mapping out of an aggressive path of further hikes this year has made abundantly clear the growing policy divergence with the BOJ.

Japan's central bank will announce its latest decision on Friday and is expected to leave all its main settings unchanged, with the war in Ukraine seen strengthening the likelihood the BOJ will stand pat for some time to come.

By emphasising that the price goal must be met in a sustainable manner, Kuroda's remarks on Thursday appear aimed at keeping a lid on speculation the BOJ may consider normalisation steps as inflation picks up in Japan, US interest rates rise and the yen continues to weaken.

Prices are expected to jump from next month when the downward impact of cheaper cell phone fees starts dropping out of calculations. An increasing number of economists say that, together with a recent surge in commodity prices, inflation could hit 2 per cent or higher even as wages continue to show little growth.

Unlike the US, Japan's economy has struggled to regain its pre-pandemic level. According to a Bloomberg survey, economists expect the recovery to stall again this quarter as omicron-linked restrictions hit consumption again. [WIRE_CREDIT]BLOOMBERG

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