© Reuters. FILE PHOTO: Japanese Prime Minister Fumio Kishida speaks during a news conference at the prime minister’s official residence in Tokyo, Japan October 14, 2021. Eugene Hoshiko/Pool via REUTERS
By Tetsushi Kajimoto and Leika Kihara
TOKYO (Reuters) -Japanese Prime Minister Fumio Kishida reiterated on Friday that it was up to the central bank to decide on an exit strategy from its massive stimulus programme, when questioned in parliament about the rising cost of living.
“It’s left to the Bank of Japan to decide on specific monetary policy, including the thinking on an exit from monetary easing,” Kishida told parliament.
“We hope the BOJ continues to make efforts to achieve its 2% inflation target,” he said.
Kishida’s comments came in response to a question from opposition lawmaker Hitoshi Asada, who called on the government to focus on structural reforms rather than rely too heavily on ultra-loose monetary policy to reflate growth.
“Ultra-loose policy can’t continue indefinitely. Without reform, it will only cause price hikes. We’re nearing the limit and a potential exit from easy policy,” Asada said.
With consumer inflation well below its 2% target, the BOJ has stressed it is in no rush to exit from ultra-easy policy and described recent cost-push inflation as transitory.
But some opposition lawmakers have warned of the hit to households from rising food and fuel prices, a sign creeping inflation is emerging as a political topic ahead of upper house elections scheduled later this year.
Policymakers see higher wage growth as crucial to mitigate the pain on households and pull the economy out of the doldrums caused by the impact of the COVID-19 pandemic.
There is uncertainty over whether companies will heed Kishida’s requests for them to raise wages as their margins have been squeezed by a record spike in wholesale prices.
“While prices go up, the economy is slumping. There is growing fear Japan may experience stagflation,” opposition lawmaker Yuichiro Tamaki said, during the questioning of Kishida in parliament a day earlier.
Japan’s core consumer inflation hit 0.5% in December from a year earlier, well below the BOJ’s 2% target. The gain was driven mostly by higher fuel costs and a steady wave of price hikes for foodstuffs such as cooking oil and mayonnaise.
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