New deputy governor Shinichi Uchida said that the Central Bank will continue easing monetary policy to achieve the target inflation rate of 2%, accompanied by a steady and stable increase in wages. Thus, Uchida confirmed the opinion of the new head of the Bank of Japan Kazuo Ueda, who said at the beginning of the week that negative interest rates and yield curve control remain appropriate in the current economic conditions.
According to official data, in February, consumer price growth in Japan slowed to 3.3% per annum from 4.3% per annum in January (the highest level in 41 years). The latest figure was the lowest since September 2022. The core CPI increased by 3.1% year-on-year, which is the lowest in 5 months. However, it remains above the Bank of Japan's 2% target for the 11th consecutive month. On a monthly basis, consumer prices fell by 0.6% in February, which was the first drop since October 2021.
"Inflation is expected to decline by the middle of this fiscal year due to government moves to curb energy prices, and as the effects of companies passing on costs wane," Uchida said.
Regarding concerns about the stability of the banking system, Uchida said that Japanese financial institutions have sufficient capital and bases to raise funds, which makes any impact of the problems faced by Western banks "limited."