Kuroda of the BOJ expects inflation to approach 1% in the middle of next year

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TOKYO – Bank of Japan Governor Haruhiko Kuroda predicts consumer inflation will accelerate to around 1% in the first half of next year as the economy returns to pre-coronavirus levels, voicing hope for a consumption-led recovery.

But with inflation still below its 2% target, the BOJ will maintain its “powerful” monetary easing and be poised to increase stimulus, even as other central banks are heading for a policy exit in mode. crisis, Kuroda said Monday.

“We expect consumer inflation to gradually accelerate to around 1% in the middle of next year as the output gap turns positive,” he said in a speech to business leaders in Nagoya, central Japan.

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Kuroda said the recovery of the world’s third largest economy has been “a little slower than initially anticipated,” as COVID-19 curbs and component shortages hit consumption and production.

“But the mechanism for an economic recovery remains intact,” he said, adding that growth is expected to recover to pre-pandemic levels in the first half of 2022, as removing the limits of the state of emergency helps boost consumption.

As automakers grapple with supply constraints, bottlenecks attributed to factory closures in Southeast Asia are likely to be resolved in the coming months, Kuroda said.

The chip shortage, however, may take longer to resolve as capacity must be increased through capital expenditures to meet robust demand, the governor added.

“If the global supply constraint lasts longer than expected, this could hurt Japan’s exports and corporate profits leading to slowing global growth and rising costs,” Kuroda said. (Reported by Leika Kihara Editing by Chang-Ran Kim and Shri Navaratnam)

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