Asahi Noguchi: Economic activity, prices, and monetary policy in Japan

Speech by Mr Asahi Noguchi, Member of the Policy Board of the Bank of Japan, at a meeting with local leaders, Nagasaki, 3 October 2024.

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

I. Economic Activity and Prices

A. Economic Developments at Home and Abroad

I will begin my speech by talking about recent economic developments at home and abroad.

In the wake of global inflation following the COVID-19 pandemic, Japan's economy has been steadily shifting away from the deflation, or low inflation, that had continued from the late 1990s. It is approaching an extremely crucial turning point, in terms of whether the Bank of Japan's price stability target of 2 percent will be achieved in a sustainable and stable manner. This depends on future economic developments at home and abroad and the underlying developments in policy conduct among the various authorities.

Turning to overseas economies, many countries and regions have been increasingly shifting the focus of their policy conduct to maintaining economic growth, as the high inflation caused by the post-pandemic reopening of the economies has begun to subside. Major central banks in the United States and Europe maintained high policy interest rates until recently in order to contain inflation. Meanwhile, as their economies have started out on a slowing trend because of this sustained monetary tightening, some of the central banks have gradually begun to reduce their policy interest rates. That said, the degree of economic slowdown in many countries and regions is quite mild, excluding China, which is undergoing real estate adjustments, and high inflation has started to be subdued without an accompanying significant rise in the unemployment rate (Chart 1). In that sense, these countries and regions have come close to containing inflation with a very soft landing.