Bank of Japan Governor Ueda says higher CPI is supply-driven inflation

Bank of Japan Governor Ueda

In response to supply-driven inflation, central banks’ decision
making faces the difficult dilemma between considerations of economic
activity and the need to tackle surging inflation
Increase in
inflationary pressure has been caused by supply factors such as a
rapid rise in commodity prices, labour shortages, and disruptions to
supply chains
Recent global
inflation has also been influenced by demand factors, including the
effects of expansionary fiscal and monetary policy measures and the
pent-up demand after the spread of pandemic
In light of these
points, it is extremely important to carefully analyse various
indicators and examine the underlying trend in prices
Whether inflation is
caused by demand or supply has very important implications for
monetary policy making
There are many
issues that need to be better understood regarding inflation
expectations
Market participants,
firms, and households all have different expectations formation,
given different perceptions of current inflation
Inflation
expectations are susceptible to the influence of their experience or
psychological conditions, as well as to the central bank’s
communication

It may be difficult to deny the possibility that we are already in a
new normal that is different from the period of ‘low for long’
inflation
As a result of
increases in the variety of tool kits and also advances in monetary
policy making, central banks need to be more careful about how they
communicate
In scheduled policy
review, boj will review the interaction between measures it took and
economic activity, prices, and financial conditions, and the positive
effects and the side effects, drawing on the knowledge in japan and
abroad

USD/JPY is up a few tics or so, circa 139.86

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