Kuroda said the BOJ's decision last week to widen the
allowance band around its yield target was aimed at enhancing the effect of its
ultra-easy policy, rather than a first step toward withdrawing its massive stimulus
program.
"This is definitely not a step toward an exit. The Bank
will aim to achieve the price target in a sustainable and stable manner,
accompanied by wage increases, by continuing with monetary easing under yield
curve control," Kuroda said in a speech delivered to a meeting of business
lobby Keidanren.
He also said Japan's average consumer inflation will likely
slow below the BOJ's 2% target in the next fiscal year as the effects of
soaring import costs dissipate.
But Kuroda said wage growth will likely increase gradually
due to intensifying labour shortages and structural changes in Japan's job
market, which are leading to higher pay for temporary workers and a rise in the
number of permanent workers.
"Labour market conditions in Japan are projected to
tighten further, and firms' price- and wage-setting behaviour is also likely to
change," Kuroda said.
"In this sense, Japan is approaching a critical
juncture in breaking out of a prolonged period of low inflation and low
growth," he said.
The strength of wage growth is seen as key to how soon the
BOJ could raise its yield curve control (YCC) targets, which are set at -0.1%
for short-term interest rates and around 0% for the 10-year bond yield.
The BOJ
shocked markets last week with a surprise widening of the band around its
10-year yield target. Kuroda had described the move, which allows long-term
rates to rise more, as aimed at easing some of the costs of prolonged stimulus
rather than a prelude to a full-fledged policy normalization.
With inflation exceeding its 2% target, however, markets are
rife with speculation that the BOJ will raise the yield targets when the dovish
governor Kuroda's term ends in April next year.
While more companies are starting to hike prices to pass on
higher costs to households, the BOJ must examine whether such changes in
corporate price-setting behaviour will take hold as a new norm in Japan, Kuroda
said.
The outcome of next year's spring wage negotiations between
big companies and unions will also be key to the outlook for wage growth, he
said.
Speaking at the same meeting, Prime Minister Fumio Kishida
called for business leaders' help in achieving wage growth high enough to
compensate households for the rising cost of living.
Japan's core consumer inflation hit a fresh four-decade high
of 3.7% in November this
year as companies continued to pass on rising costs to households, a sign that
price hikes were broadening.
But wages have barely risen for permanent workers, as
companies remained cautious about increasing fixed costs amid an uncertain
economic outlook.
