BOJ's Kuroda Says Pick-up In Inflation May Hurt Economy, Pledges Easy Policy

An expected acceleration of inflation could hurt Japan's economy by weighing on household income and corporate profits, Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Tuesday, promising to maintain a "powerful", ultra-loose monetary policy.

Kuroda also warned of "extremely high" uncertainty on how the Ukraine crisis could affect Japan's economy.

"Consumer inflation is likely to clearly accelerate ahead but the rise will be driven mainly by an increase in energy prices," Kuroda said, warning that such a rise in import costs could weigh on growth.

"We will patiently maintain powerful monetary easing to support an economy still in the midst of recovering from the COVID-19 pandemic's impact," he said, speaking before parliament in a semi-annual testimony on the BOJ's actions.

BOJ Executive Director Shinichi Uchida told the same parliament session that consumer inflation will likely pace up to around 2% and stay there for some time, due to surging energy costs and the dissipating effect of cellphone fee cuts.

"Such cost-push inflation ... could hurt the economy and may weigh on trend inflation," Uchida said. "Cost-push inflation alone won't help Japan achieve sustainable price growth."

Surging fuel and raw material prices, driven by the war in Ukraine, have pushed up Japan's wholesale inflation to record levels and prodded more companies to pass on higher costs to households.

Analysts expect core consumer inflation to hit the central bank's long-elusive 2% target this month, though many doubt the rise could be sustained as wage and economic growth remain slow.