BANGKOK (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Tuesday he expected inflation to accelerate considerably in the coming months due to a tight labour market, and he brushed off the idea of needing more quantitative easing.
Kuroda, in response to questions after giving a speech, also said consumer prices are still on track to meet the central bank’s 2 percent inflation target sometime around the first half of fiscal 2016.
Kuroda’s optimism is in contrast with growing worries that turbulence in the global economy could cause oil prices to resume their decline and place more downward pressure on Japan’s consumer prices.
“Right now, the inflation rate is close to zero,” Kuroda said. “The inflation rate should start to accelerate considerably in coming months.”
The BOJ expects to meet its 2 percent inflation target sometime around the first half of next fiscal year partly because it assumes that oil prices will steadily recover from last year’s sell-off.
However, this scenario is looking doubtful as worries about China’s bubble economy and Greece’s debt problems could hurt global growth and reduce demand for energy.
Speaking later to Reuters, Kuroda reiterated his view that he would not hesitate to ease policy further if needed but that he did not see this need arising.
One factor supporting the outlook for prices is that Japan’s labour demand is the strongest in more than 20 years and wages are gradually rising, which should give consumers more power to spend.
Writing by Stanley White; Editing by Hugh Lawson