BOJ policy board member Junko Nakagawa Speech at a Meeting of the Okayama Club.
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Bank of Japan policy board member Junko Nakagawa said the central bank will maintain a cautious stance as trade policy risks remain elevated and inflation expectations continue to rise toward the 2% target.
Nakagawa said the BOJ would make policy decisions “appropriately” while considering the high degree of uncertainty in global trade, noting that U.S. tariffs and shifts in Chinese exports to non-U.S. markets could weigh on both the global and Japanese economies.
She said Japanese firms remain committed to capital spending despite those headwinds, a sign of resilience and confidence in the corporate sector. However, she warned that the uneven effects of inflation pose new challenges — with companies becoming more active in raising prices and wages, which may lift household inflation expectations but also strain consumer sentiment.
Nakagawa added that rising prices could eventually dampen demand, prompting firms to cut costs and hold back on further wage increases if profitability is squeezed. Still, she said the overall picture shows medium- to long-term inflation expectations edging higher, while the BOJ’s baseline view on overseas economies remains unchanged.
On the domestic front, Nakagawa noted that household consumption remains firm though spending on non-durables has softened amid higher food prices. Services demand has also stabilised after moderate gains earlier in the year.
Her remarks reinforced the BOJ’s careful, data-dependent approach as it weighs whether higher inflation expectations reflect durable wage-price dynamics or near-term cost pressures.
This article was written by Eamonn Sheridan at investinglive.com.