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BOJ debated rising wages, fading deflation risks at Dec meeting

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BOJ debated rising wages, fading deflation risks at Dec meeting
© Reuters. FILE PHOTO: A man walks past Bank of Japan’s headquarters in Tokyo, Japan, June 17, 2022. REUTERS/Kim Kyung-Hoon/File Photo

By Leika Kihara

TOKYO (Reuters) -Bank of Japan (BOJ) policymakers saw the need to keep ultra-low interest rates but discussed growing prospects that higher wages could finally eradicate the risk of a return to deflation, a summary of opinions at their December meeting showed.

At the Dec. 19-20 meeting, the BOJ kept its ultra-easy policy but shocked markets with a surprise tweak to its bond yield control that allows long-term interest rates to rise more.

Several in the nine-member board said the decision was aimed at making the current stimulus programme more sustainable by addressing its side-effects and wasn’t a first step toward ending ultra-loose monetary policy, the summary showed on Wednesday.

But discussions at the board delved into signs of change in Japan’s price outlook that could lay the groundwork for an eventual withdrawal of stimulus as dovish governor Haruhiko Kuroda’s second, five-year term draws to an end next year.

While some said Japan has yet to sustainably hit the central bank’s 2% inflation target, others saw growing signs of change in companies’ prolonged aversion to raising wages and prices.

“Price rises are accelerating not just for goods but for services … There’s a chance Japan’s inflationary momentum is heightening,” one member was quoted as saying.

Another opinion said Japan could be seeing conditions fall into place to sustainably shake of the risk of a return to deflation, the summary showed.

Source: Investing.com

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