Photo/Illutration Prime Minister Fumio Kishida, left, and Bank of Japan Governor Haruhiko Kuroda head to their seats for an Oct. 25 meeting about the monthly economic report. (Koichi Ueda)

Prime Minister Fumio Kishida and Bank of Japan Governor Haruhiko Kuroda agree on the need for wage increases to match a recent surge in consumer prices but seem to be at odds in other economic policy areas.

“What we must place top priority on is wage increases in line with the rise in consumer prices,” Kishida said at an Oct. 28 news conference where he outlined the details of his administration’s economic package.

He stated that the annual spring offensive for wage levels between labor and management next year would be decisive in determining if the Japanese economy can enter a positive spiral of economic growth and distribution of benefits.

On the same day at his own news conference following a BOJ policy meeting, Kuroda was asked about the central bank’s projection for fiscal 2022 of a 2.9-percent consumer inflation rate.

“The consumer price increase is not a sustainable one that has been accompanied by wage increases,” Kuroda replied.

He said the BOJ would stick with its loose monetary policy because the domestic economy was still partly on its way to recovery even though the inflation rate projection exceeds the central bank’s own 2-percent goal.

But in other important respects Kuroda and Kishida were announcing measures in direct conflict with each other. The ultra-loose monetary policy of the BOJ is considered the primary factor behind the plunging of the yen against the dollar as other central banks raise their interest rates. That has contributed to raising the cost of imported food products.

Kishida was forced to announce the economic package to help counter the negative effects of the weak yen on surging consumer prices.

While acknowledging the difficulty of suddenly hiking interest rates in Japan, government officials have also increasingly been critical of what Kuroda has been saying.

At his news conference in September, Kuroda said there would be no need over the next two to three years to tighten monetary policy.

That comment triggered a sharp drop in the value of the yen against the dollar and led the government and BOJ to intervene in the foreign currency market for the first time in 24 years.

Kuroda’s term as BOJ governor ends next spring so his comment covered a period when he likely will no longer head the central bank.

“He did not need to say two to three years,” said one high-ranking Finance Ministry official. “I hope he is more careful about what he says.”

A former BOJ executive, remarking on Kuroda’s style, said: “He hates to be ambiguous in his comments and his basic stance is to not simplify logic and use a different way of saying the same thing. For that reason, some of his comments give the appearance of being undisguised.”

But Kuroda also faces the added pressure of causing markets to react as any change of tone in what he says could be construed as a sign the BOJ is changing course.

(This article was written by Shinya Tokushima and Satoshi Kimura.)

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