Haruhiko Kuroda: Japan's economy and monetary policy

Speech (via webcast) by Mr Haruhiko Kuroda, Governor of the Bank of Japan, at a meeting with business leaders, Osaka, 27 September 2021.

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

It is my great pleasure to have the opportunity today to exchange views with a distinguished gathering of business leaders in the Kansai region. I would like to take this chance to express my sincerest gratitude for your cooperation with the activities of the Bank of Japan's branches in Osaka, Kobe, and Kyoto. While it is most regrettable that I am unable to visit Osaka for the second year in a row due to the continuing impact of the novel coronavirus (COVID-19), I look forward to hearing your views online, which will be useful in the Bank's policy decisions and business operations. In my speech today, I will talk about the Bank's view on developments in economic activity and prices and then explain the thinking behind the recent conduct of monetary policy.

I. Developments in Economic Activity and Prices

Economic Developments

Let me start by talking about economic developments. Japan's economy has picked up as a trend, although it has remained in a severe situation due to the impact of COVID-19 at home and abroad. Looking back, in the April-June quarter of 2020, when the first state of emergency was declared, real GDP fell by about 10 percent compared with the level before the pandemic as a wide range of economic activities were negatively affected. However, the level of real GDP increased through the second half of the year. Since the turn of this year, real GDP has remained more or less flat because private consumption has been pushed down by the impact of the repeated resurgence of COVID-19 and public health measures. The level of real GDP for the April-June quarter this year is still almost 3 percent below the pre-pandemic level (Chart 1). The rapid spread of the highly contagious Delta variant during the summer inevitably has led to subdued face-to-face services, such as accommodations as well as eating and drinking, and private consumption overall has remained stagnant.