Business News/ Specials / New Bank of Japan Governor Sees Signs of Sustainable Inflation

TOKYO–Rising prices of hotel rooms are an indication that Japan might be decisively pulling free of deflation, the country’s central bank chief said.

Bank of Japan Gov. Kazuo Ueda said he saw the trend of higher lodging costs when he used to make his own hotel bookings for business trips before he took up the governor’s post in April.

“There appear to be moves leading towards sustainable inflation," Ueda said in an interview Thursday with The Wall Street Journal and other media.

Unlike the Federal Reserve, which has raised rates aggressively since early 2022, the Japanese central bank has maintained monetary easing. It says inflation in Japan is mainly due to temporary rises in energy prices and not backed by strong demand, and is thus not sustainable.

Still, speculation is growing among economists and investors that the bank will tweak its control over the 10-year Japanese government bond yield as soon as this year. In a surprise move last December, the bank raised its bond yield cap to 0.5% from 0.25%.

Economists say service prices for things like movie tickets and hotel rooms will likely contribute to achieving sustainable overall inflation because they tend to reflect higher wages, compared with prices of goods, which fluctuate more widely depending on energy costs and foreign-exchange rates.

Recent wage negotiations in Japan resulted in the biggest pay raises in three decades at some major companies.

Service prices, which had been negative or nearly flat over the past two decades, have started rising at a faster pace in recent months. Government data showed service prices rose 1.7% from a year earlier in April. They were falling last summer.

Earlier this month, two major Japanese movie theater operators announced that they would raise their ticket prices by 100 yen, equivalent to 70 cents, starting next month. They cited higher wages as one of the reasons for the increase.

Reflecting the global energy crisis triggered by the war in Ukraine, as well as the yen’s sharp decline, inflation finally exceeded the BOJ’s target of 2% last year.

“Whether price increases in the service sector become widespread and continue is one of the points" to monitor to see if inflation above 2% can be sustained, Ueda said.

Ueda said the bank would continue monetary easing for now to nurture such positive developments and keep an eye on any unexpected movements that affect its inflation projections.

“We should respond quickly if we detect risks that are difficult to predict," such as bigger-than-expected changes in wages and prices, he said.

The BOJ governor has said inflation might fall below the bank’s 2% target toward the latter half of this fiscal year, which started in April.

Ueda, a former BOJ board member with a Ph.D. from the Massachusetts Institute of Technology, succeeded Haruhiko Kuroda as BOJ governor in April, after Kuroda’s decadelong monetary-easing policy helped stop falls in prices and create a tighter job market.

Some critics say Kuroda’s aggressive bond buying has led to loose fiscal discipline. Ueda said the bank wouldn’t delay a decision to unwind its monetary easing when its goal is met to help push down the government’s interest payments.

Write to Megumi Fujikawa at

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