Bank of Japan Executive Director (a post equivalent to a board member) Shimizu
- says inflation has so far has been driven by cost-push factors
- even if negative rates abandoned, accommodative conditions would remain
USD/JPY little changed around 148.05, just off its Asia morning lows.
Inflation has been well above the Bank of Japan 2% target for going on to two years now. The Bank is still not convinced its sustainable/stable above 2% though, saying its due to cost-push factors having driven it higher. The Bank is watching for gains in wages to support ‘demand-pull’ inflation.
Cost-push inflation and demand-pull inflation are two types of inflation that arise from different economic factors. Here’s a comparison between the two:
- Cost-Push Inflation: Cost-push inflation occurs when there is an increase in production costs, such as wages, raw materials, or energy prices. These cost increases lead to a decrease in the supply of goods and services, causing prices to rise.
- Demand-Pull Inflation: Demand-pull inflation occurs when there is an increase in aggregate demand for goods and services. This increase in demand outpaces the economy’s ability to supply goods and services, resulting in upward pressure on prices.
- Cost-Push Inflation: The main drivers of cost-push inflation are factors like rising labor costs, increased production costs due to higher commodity prices, or government regulations leading to increased costs for businesses.
- Demand-Pull Inflation: Demand-pull inflation is driven by factors such as increased consumer spending, government spending, investment, or expansionary monetary policies that stimulate aggregate demand beyond the economy’s productive capacity.
This article was written by Eamonn Sheridan at www.forexlive.com. Source