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

Speech (via webcast) by Mr Toyoaki Nakamura, Member of the Policy Board of the Bank of Japan, at a meeting with local leaders, Miyazaki, 25 August 2021.

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

Economic and Price Developments at Home and Abroad

A. Recent Developments in Economic Activity and Prices

I will begin my speech by talking about recent developments in economic activity and prices. Overseas economies have recovered on the whole, led by advanced economies and China, despite the growing impact of the spread of the novel coronavirus (COVID-19) and its variants (Chart 1).

Against this background, Japan's economy has picked up as a trend, although it remains in a severe situation (Chart 2). Exports and production continue to increase steadily. Business performance of firms also has improved on the whole. On the other hand, private consumptionhas been stagnant due to weakness in consumption of face-to-face services, such as eating and drinking as well as accommodations. On the price front, the year-on-year rate of change in the consumer price index (CPI) for all items less fresh food, or the core CPI, has been at around 0 percent recently, mainly due to the rise in energy prices, despite being affected by COVID-19 and the reduction in mobile phone charges (Chart 3). The rate of change in the core CPI remains slightly positive and has been steady when excluding the temporary effects of energy prices and mobile phone charges. Given that the recent large reduction in charges for mobile phones is a temporary price change in one specific sector, it is rather unlikely to affect people's medium- to long-term inflation expectations. Nonetheless, I will continue to closely monitor price developments.

B. Outlook for Economic Activity and Prices

Let me touch on future developments in overseas and domestic economies. As the impact of COVID-19 wanes due to progress with vaccinations, overseas economies are likely to continue growing, albeit with variation across countries and regions, supported also by aggressive macroeconomic policies taken mainly in advanced economies.