The rest of the global economy may be struggling as oil prices sag, but Bank of Japan Governor Haruhiko Kuroda said today that the decline in oil prices is boosting Japan’s economy and will accelerate inflation.
The slump in oil prices has driven down consumer inflation in Japan, which dropped to 0.9 percent in the year, well below the 2 percent the Bank of Japan has been striving to achieve. The BOJ may have to cut its price forecasts and ease monetary policy early next year when it will need to put out some fresh projections, according to Reuters.
But Kuroda said during a meeting with Japan’s largest business lobby that while lagging oil prices are hurting inflation in the short run, in the long run it will boost consumer spending as it increases profits for companies and eventually leads to increased wages.
He also said that monetary easing issued by the bank in October wasn’t related to crude oil prices. Since Japan imports much of its commodities, a drop in crude oil prices is good for the nation, he argued.
The BOJ boosted monetary stimulus this fall to prevent a slowdown in inflation. Kuroda said Japan’s economic recovery was on its way and would soon shake off its “deflationary mindset,” according to Reuters.
Kuroda said companies need to do their part in the economic recovery by increasing wages and benefits as the yen weakens and crude oil prices drop.
