Tokyo, Dec. 26 (BNA): Bank of Japan Governor Haruhiko Kuroda on Monday brushed off the chance of a near-term exit from ultra-loose monetary policy, but said he hoped a growing labor shortage would prompt companies to raise wages.
Kuroda said the Bank of Japan’s decision last week to widen provisioning around its yield target was intended to boost the impact of its ultra-easy monetary policy, not a first step toward withdrawing its massive stimulus programme, Reuters reported.
Kuroda said in a speech to a meeting of Japanese business lobby Keidanren.
He also said that average consumer inflation in Japan is likely to slow below the Bank of Japan’s 2% target in the next fiscal year as the effects of higher import costs fade.
But Kuroda said wage growth is likely to pick up gradually due to severe labor shortages and structural changes in Japan’s labor market, leading to higher salaries for temporary workers and an increase in the number of permanent workers.
“Labor market conditions, especially for non-permanent employees, are expected to tighten further,” he said.
“With the recovery of the Japanese economy, the demand for labor is expected to increase, especially in the face-to-face service industry,” Kuroda said.
The Bank of Japan shocked the markets last week with a surprise adjustment to the bond yield control. The move, which allows long-term interest rates to rise further, was intended to mitigate some of the costs of prolonged monetary stimulus.
SM