BOJ's Ueda Sees Tough Balance in Combating Cost-Push Inflation

BANK OF JAPAN / BOJ - TOKYO. Bank of Japan Governor Kazuo Ueda said on Wednesday the central bank's response to cost-push inflation would depend on economic conditions.

"In general, dealing with cost-push inflation is very difficult for central banks. On the one hand, you'd like to curb inflation. On the other hand, you don't want to tighten monetary policy knowing that cost-push inflation will cool the economy," Ueda told parliament.

"Striking the right balance is very difficult. It depends on economic developments at the time, including where inflation stood at the outset," he said.

Ueda added that Japan will see cost-push inflation subside as prices of imported raw materials have likely peaked.

The remarks underscore the challenge global central banks face as they struggle to rein in inflation despite a series of interest rate hikes that have slowed growth.

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The BOJ remains a dovish outlier as it focuses on supporting the economy, arguing the recent rise in inflation is driven mostly by rising import costs and therefore unsustainable.

But markets are rife with speculation that inflation and wage growth, as well as the mounting cost of prolonged easing, will prod the BOJ to soon phase out its controversial bond yield control policy.

Ueda's comments compare with those of his predecessor Haruhiko Kuroda, who repeatedly brushed aside the chance of responding to cost-push inflation with monetary policy.

They also come ahead of the BOJ's two-day policy meeting that begins on Friday, where the central bank is widely expected to maintain ultra-loose monetary settings.