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2026-05-27 09:07:34
【Kazuo Ueda: Temporary Energy Shocks May Turn into Persistent Inflation if They Change Wages and Expectations】 (1) Bank of Japan Governor Kazuo Ueda stated that central banks should not view oil prices in isolation. If temporary energy shocks change wage levels, inflation expectations, and pricing behavior, they may turn into persistent shocks. (2) He pointed out by comparing Japan's past energy shocks that the same rise in oil prices can have drastically different effects depending on initial conditions such as wages, expectations, demand, and exchange rates. (3) If inflation expectations are already high and wage growth is accelerating, there is a high risk of a second round of effects; conversely, if inflation expectations are low and wages are stagnant, even a huge cost shock may not push up inflation expectations. Therefore, the boundary between temporary inflation and persistent inflation is not mechanically defined. (4) These remarks came as the surge in oil prices triggered by the Middle East conflict was exacerbating inflationary pressures in Japan, and the market expected the Bank of Japan to raise interest rates as early as next month.
