BOJ Shirai warns of risks to price outlook, but sees no imminent easing
By Leika Kihara
TSU, Japan (Reuters) - Bank of Japan board member Sayuri Shirai ruled out the chance of an imminent expansion of monetary stimulus, but warned of risks to the price outlook that may put pressure on the central bank as it seeks to hit an ambitious inflation target.
Shirai, a former IMF economist who is more pessimistic about price prospects than some others in the board, said a broad uptrend in inflation was taking hold, and steady improvements in the economy would help lift wages and consumer prices.
But she warned that wage rises have been modest and companies may be slow in raising prices of their goods if underlying inflation remained subdued for too long.
"If downside risks materialise and significantly weaken the underlying trend in inflation, I would not hesitate to consider some monetary policy actions," Shirai told business leaders in Tsu, a city in the western prefecture of Mie, on Wednesday.
"At present, however, I view such a possibility to be low."
The BOJ has stood pat on policy since expanding its massive stimulus programme in October last year to prevent slumping oil costs, and a subsequent slowdown in inflation, from delaying a sustained end to deflation.
It pushed back the timing for hitting its price target in April and now says inflation will reach 2 percent in the first half of next fiscal year beginning in April 2016.
Many analysts see the new timeframe as too ambitious with consumer inflation hovering around zero due to the lower cost of oil and soft private consumption.
Shirai said inflation will accelerate moderately as household and corporate spending recover from the pain of last year's sales tax hike.
But she said disappointingly weak inflation expectations have prevented price rises from accelerating as much as the BOJ hoped. Companies may continue to hold off on raising prices if inflation remained subdued, she added.
"If a deviation of actual inflation and the BOJ's price target is sustained, the public and markets may begin to believe that achieving the target would be difficult," she said.
"This may make it harder for medium- to long-term inflation expectations to rise further and steadily."
Shirai is among those in the board who feel it will take longer than the BOJ's consensus forecast to hit 2 percent inflation.
In April, she proposed setting the timing for hitting the target "at or around fiscal 2016," which would give the BOJ until early 2017 in meeting the price goal. The proposal was turned down by the board.
(Reporting by Leika Kihara; Editing by Chang-Ran Kim & Shri Navaratnam)
