Japan PM Kishida says return to deflation cant be ruled out

Japan PM Kishida says return to deflation can't be ruled out

TOKYO (Reuters) – Japanese Prime Minister Fumio Kishida said on Friday the economys retreat to deflation cannot be ruled out because domestic demand-driven inflation remains feeble.

“Inflationary pressure based on domestic demand is not strong yet, as current consumer price increases are brought by global raw material inflation and a weak yen,” Kishida told an upper house parliament session.

Asked by an opposition lawmaker if the Japanese economy has fully exited from the deflationary situation, Kishida said: “the state of non-deflation is going on at the moment, but it has not reached a stage where we can judge that the return (to deflation) is unlikely.”

Kishida also said the Bank of Japans decision at its December policy meeting was an operational tweak to enhance and sustain the effects of monetary easing smoothly.

Following the surprise tweak to its yield curve control policy last month, the BOJ maintained its ultra-loose stance at the Jan. 17-18 meeting to support the economy and help companies raise salaries.

“The government and the BOJ have agreed to closely cooperate towards economic growth in tandem with structural wage hikes and the sustainable, stable achievement of the inflation target,” Kishida said, reiterating his previous remarks.