Wakatabe also said monetary policy was not the right tool to deal with recent cost inflation in Japan, which was mainly due to soaring fuel costs rather than strong demand.
“Since energy and food price increases are mainly caused by cost-push factors from abroad, it is desirable to respond to them with measures other than monetary policy,” said Ms. Wakatabe in a speech.
“Possible options include fiscal policy and energy policy to reduce Japan’s dependence on oil and natural gas,” said Wakatabe, a former academic seen as a proponent of aggressive monetary easing.
Analysts expect rising fuel and commodity costs to keep core Japanese consumer inflation, which hit 2.1% in April, around the central bank’s 2% target for most of this year.
But Mr Wakatabe said Japan has yet to meet the BOJ’s price target in a sustainable way, adding that price increases must be supported by higher wages and stronger inflation expectations.
He also warned of risks to Japan’s economic outlook, such as supply chain disruptions caused by China’s COVID-19 restrictions and possible market volatility from interest rate hikes. American interest.
“If the risks to the economy materialize, the BOJ should not rule out taking further monetary easing without hesitation,” he said.
Mr. Wakatabe expressed doubts about the return of the world economy to an era of high and sustained inflation.
“Leaving other countries aside, my biggest concern for Japan, at least for now, is continued weak growth, low interest rates and low inflation,” he said. he said. (Reporting by Leika Kihara; editing by Chang-Ran Kim and Sam Holmes)