Feb 28 (Reuters) - Central banks must remain on guard
against the potential dangers of secular stagnation and low
inflation as price rises driven by cost-push factors do not last
long, Bank of Japan (BOJ) Deputy Governor Masazumi Wakatabe said
on Monday.
Japan's economy was in deflation for a prolonged period, but
sustainable monetary easing has "certainly had a positive
effect" on the real economy, Wakatabe said, defending the BOJ's
prolonged, ultra-loose monetary policy.
"The mild-inflation regime has not come to an end, and we
should say that the potential dangers of secular stagnation and
Japanification have not yet passed," he said in a speech
delivered at Columbia University in New York.
"Japanification" is a concept used among academic circles
that points to Japan's experience with a long period of
stagnation accompanied by deflation or low inflation from the
late 1990s through the early 2000s.
While inflation has recently accelerated across the globe,
many of the factors pushing up prices are driven by higher costs
such as the war in Ukraine, Wakatabe said.
"When an exogenous shock occurs, there is an adjustment from
the old to a new price system. After adjustment, the rising
inflation rate is likely to return to the steady-state inflation
rate," he said.
"So the important point is how this rate is affected. Of
course, it is possible that cost-push factors will remain, but
whether they will push up the steady-state inflation rate is
uncertain," Wakatabe said, adding that it was "well known that
cost-push inflation does not last long."
A former academic, Wakatabe is known as a proponent of
aggressive monetary easing. His five-year term as deputy BOJ
governor ends in March.
(Reporting by Leika Kihara; Editing by Stephen Coates)
Messaging: leika.kihara.reuters.com@reuters.net))
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