The BOJ agreed on the need for low rates and saw wage hikes as key to the outlook

A man wearing a protective mask walks past the Bank of Japan headquarters amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

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  • Some board members saw price increases widen – June meeting minutes
  • The board agreed that economic uncertainty was ‘extremely high’
  • Many members spoke about the importance of wage increases – minutes
  • BOJ kept rates ultra-low and pledged to defend yield cap at June meeting

TOKYO, July 26 (Reuters) – Bank of Japan leaders see wage hikes as key to sustaining their 2% inflation target, June meeting minutes show, underscoring the Bank’s determination the bank to keep interest rates extremely low despite growing signs of price pressure. .

Some members of the nine-member council saw the price hikes widen and lead to changes in the public’s longstanding perception that inflation and wages would not rise much in the future, the lawsuit alleges. minutes published on Tuesday.

But members agreed the economy needed massive monetary support to weather the hit from rising commodity prices and supply disruptions caused by COVID-19 lockdowns in China.

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“The board of directors agreed that the uncertainty surrounding the Japanese economy was extremely high,” the minutes showed.

“Many members spoke about the importance of wage increases in the prospect of meeting the BOJ price target in a sustained and stable manner.”

At the June meeting, the BOJ kept interest rates rock-bottom and pledged to defend its cap on bond yields with unlimited buying, thwarting a global wave of monetary tightening in a show of determination to hold on tight. focus on supporting a tepid recovery. Read more

“Japan needs to create a resilient economy in which consumption continues to rise even as companies raise prices,” a board member said.

“The BOJ should maintain monetary easing until wage increases become a trend, and help Japan meet the bank’s price target in a sustainable and stable manner,” another member said.

Japan’s core consumer prices rose 2.2% in June from a year earlier, beating the BOJ’s target, mainly due to soaring fuel and raw material prices blamed on the war in Ukraine.

The rise in the cost of living is hurting households particularly, as companies remain reluctant to raise wages due to uncertainty about their business outlook.

Inflation-adjusted real wages, a key indicator of consumer purchasing power, fell 1.8% from a year earlier, extending their decline to post the largest year-on-year decline in nearly two years. Read more

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Reporting by Leika Kihara; Editing by Kim Coghill

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