Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Thursday that recent declines in oil prices offer great benefits for Japan's economy and will help to accelerate inflation in the long run. The global slump in oil prices has created a major headache for the central bank by driving down Japan's consumer inflation, which fell to 0.9 per cent in the year to October and is well below the 2 percent target the BOJ has pledged to meet during the fiscal year beginning next April.
Some analysts believe the BOJ will be forced to cut its rosy price forecasts and ease monetary policy in January, when it issues fresh long-term economic and price projections.
Kuroda shrugged off that view, however, saying that while oil price falls weigh on overall prices in the short run, they will help to boost corporate profits and allow companies to increase wages.
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"Let me be clear that October's monetary easing wasn't directly in response to crude oil price falls," Kuroda told a meeting of Keidanren, Japan's biggest business lobby. "Japan, a commodity-importing country, benefits greatly from the decline in crude oil prices, especially when it is caused mainly by supply-side factors, as is the case now," he said.
The BOJ expanded its monetary stimulus in October to prevent slumping oil prices, and a subsequent slowdown in inflation, from dampening inflation expectations.
Kuroda voiced confidence about Japan's economic recovery and stressed that it was making steady progress in shaking off the "deflationary mindset" that had led companies and households to hold off on spending, in anticipation that prices would fall in the future.
