Criticism has forced Bank of Japan (BOJ) Governor Haruhiko Kuroda to retract a recent public remark that consumers in Japan have become "more tolerant" of rising prices. The comment failed to consider the perspective of people struggling under the burden of higher prices for daily necessities even as wages remain stagnant. Indeed, it could cast doubt on the BOJ's understanding of the realities of people's daily lives.
Kuroda said, "We need to maintain a good economic environment while consumers are tolerating rising prices, and whether we'll be able to use that toward a full-fledged wage increase next fiscal year and onward will be key," as if he's willing to have the people endure the burden of inflation.
He also stated his belief that consumer savings have increased due to staying in and other restrictions on activities during the coronavirus crisis, and that people have enough cash to accept price increases. Except for the more affluent segment of society, we wonder just how many people feel they have enough to spare while trying to meet daily expenses. At best, Kuroda's analysis made light of the realities each person faces.
It was also problematic that Kuroda appeared to have arbitrarily chosen one survey that fit his narrative. He referred to an opinion poll in which a majority of respondents answered that they would keep shopping at their regular stores even if they put up prices. What he failed to mention was that the same survey also highlighted that consumers were inclined to buy less and on fewer occasions to save money.
The retail price of instant cup noodles has recently gone up, and price hikes are likely to continue until the fall for items including bread and beer. We're not yet at a stage where we can determine to what extent rising prices are affecting household budgets.
The BOJ has rigidly maintained that it will keep its ultra-easy monetary policy. While Japan's inflation rate met the BOJ's 2% target in April, the central bank has judged that global commodity price increases -- one cause of the recent inflation at home -- will "negatively affect the economy."
The BOJ chief, on the other hand, appears to see price hikes favorably, and indicated an optimistic view that rising prices would turn the Japanese economy around. The inconsistency is undeniable.
Critics point out that the BOJ's monetary easing policy has contributed to a weak yen and fueled the price increases even further.
Kuroda's latest remark, so divorced from the people's actual sentiments, can cause a loss of public trust in Japan's monetary policy. What is required of the central bank is to closely analyze the current situation and explain it carefully to the people.