Analysis-BOJ's victory lap on deflation paves way for rate-hike cycle
TOKYO - The Bank of Japan is setting the stage for an era of steady interest rate hikes by claiming victory in its long battle with deflation, sources and analysts say, in a major review of past policy that nods to significant consumer behaviour shifts.
"The BOJ is using the idea of Japan's changing social norm to back up its projection that inflation will durably hit 2% in coming years - a prerequisite for rate hikes," said former BOJ official Nobuyasu Atago, who is currently chief economist at Rakuten Securities Economic Research Institute. What the experiment failed to achieve was ultimately accomplished by external factors like supply constraints caused by the pandemic and the war in Ukraine, which pushed up import costs and kept inflation above 2% for well over two years.
Aki Kuramoto, a 55-year-old office worker with two children, is bracing for an era where prices will keep going up. "It's become much easier for companies to raise prices," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute."Whether this trend continues would depend on the strength of consumption."
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