Toyoaki Nakamura: Economic activity, prices, and monetary policy in Japan

Speech by Mr Toyoaki Nakamura, Member of the Policy Board of the Bank of Japan, at a meeting with local leaders, Gifu, 31 August 2023.

The views expressed in this speech are those of the speaker and not the view of the BIS.

Central bank speech  | 
07 September 2023
by Toyoaki Nakamura
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  |  26 pages

I. Economic and Price Developments at Home and Abroad

A. Recent Developments and Outlook for Economic Activity and Prices

I will begin my speech by talking about recent developments in overseas economies.

The pace of their recovery has slowed, weighed down in part by the situation in Ukraine; inverted yield curves have been seen in eight countries using the Group of Ten (G10) currencies, with inflationary pressure remaining on a global basis and continued policy interest rate hikes by central banks (Chart 1).1 The U.S. economy has been affected by price rises and continued policy interest rate hikes, but private consumption has been resilient on the back of wage growth continuing to exceed 4 percent since the latter half of 2021. There are growing expectations that the economy will be able to avoid recession, as real GDP for the April-June quarter of 2023 was higher than expected, at 2.4 percent on an annualized quarter-on-quarter basis. 2 Although concern over energy supply has eased, European economies have slowed in reflection of continued policy interest rate hikes, with the impact of the situation in Ukraine and the widening inflation gap across euro area economies. As for the Chinese economy, services consumption has increased, whereas goods consumption has been weak. Although the economy is projected to continue picking up, partly with policy support, there is concern over a decline in growth expectations and a slowdown in economic recovery due to a prolongation, for example, of the sluggish real estate market, the high youth unemployment rate, weaker exports, the U.S.-China tension, and a decrease in foreign investment. As I have explained, the risks to overseas economies are skewed to the downside on the whole.