As Omicron risks grow, BOJ in no hurry to boost stimulus

The Bank of Japan can hold off on expanding stimulus unless a spike in Omicron cases triggers huge market turbulence, board member Seiji Adachi said, suggesting policymakers will tread cautiously as they ascertain the risks posed by the variant.

Adachi, a former economist considered as among those favouring aggressive monetary easing, also said inflationary pressures in Japan were not just being driven up by rising energy costs but also from changing corporate price-setting behaviour.

“As the pandemic shows sign of subsiding, companies are gradually starting to hike goods and services prices,” Adachi said in a speech on Wednesday.

“In a post-pandemic environment, companies may find good opportunities to raise prices and wages.” Japan’s annual wholesale inflation hit a four-decade high of 8.0% in October on rising commodity costs. But core consumer inflation has hovered around zero as soft consumption keeps firms from raising prices.

While Adachi stressed the need to maintain the BOJ’s current ultra-loose policy, he said ramping up stimulus would become an option only in extreme cases where a resurgence in infections paralyse the global economy.

– Reuters