News

© Reuters. FILE PHOTO: A man wearing a protective mask walks past the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon By Leika Kihara

TOKYO (Reuters) -Bank of Japan Governor Haruhiko Kuroda said on Wednesday the country’s consumer inflation may approach his 2% target as rising raw material costs push up wholesale prices.

But he said the central bank would maintain its ultra-loose monetary policy to ensure any rise in prices would be accompanied by higher wages and a recovery in the economy.

“It’s true there’s a chance consumer inflation will approach 2% through various channels,” Kuroda told parliament.

“But what’s desirable is for the economy to recover steadily and push up corporate profits, thereby leading to higher wages and inflation. We’ll patiently maintain ultra-easy policy to achieve this at the earliest date possible,” he said.

Kuroda also said recent rises in wholesale prices likely won’t immediately push up consumer inflation, as Japanese firms tend to avoid price hikes even when rising costs hit margins.

“I don’t think Japan’s economy is in a state of stagflation,” he said, brushing aside the chance the country will face an economic slump accompanied by higher inflation.

Japan’s wholesale inflation hit a record 9.0% in November, pushing gains for a ninth straight month, a sign upward pressure on prices from supply bottlenecks and rising raw material costs were broadening.

But core consumer inflation remains stuck around zero as firms remain cautious about passing on costs to consumers on concerns cost-sensitive households may hold back on spending.