By Makiko Yamazaki
TOKYO (Reuters) – Bank of Japan Governor Kazuo Ueda stated on Wednesday that the central bank will consider risks of high food prices affecting inflation expectations.
“We’re deeply aware that a rise of more than 2% in prices of fresh foods and other commonly purchased products are negatively impacting people’s lives,” Ueda told parliament.
He noted that increases in food prices, particularly fresh food, may not be temporary, potentially impacting public mindsets and price expectations.
These comments came after the BOJ’s decision last month to raise short-term interest rates to 0.5%, a level not seen in Japan for 17 years. This reflects policymakers’ belief that the economy is on track for wage-driven, sustainable price increases.
The overall consumer price index (CPI) rose by 3.6% in December from the previous year, exceeding a 3.0% increase in the core index, which excludes volatile fresh food prices, driven by spikes in fresh vegetables and rice costs.
Ueda mentioned that such cost-push inflation pressures are likely to decrease by mid-year.
To determine if inflation will consistently meet its 2% target, the BOJ monitors underlying inflation, which accounts for broader price trends while excluding transient factors like fuel and volatile food prices.
At the parliamentary session, Ueda emphasized that the pace of interest rate hikes will depend on economic conditions, prices, and financial situations.
He also confirmed that a mid-term review of the bond purchase tapering plan will take place in June, with a new strategy to be implemented from April 2026.
Last July, the BOJ announced plans to reduce its monthly Japanese government bond purchases to 3 trillion yen ($19.52 billion) starting from January-March 2026.
“We’ve formulated and are implementing our bond-taper plan based on the view that tapering should be done in a predictable manner with a certain degree of flexibility to ensure the stability of bond markets,” Ueda stated in parliament.
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