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, Sapporo, 6 June 2024.

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

I. Economic and Price Developments at Home and Abroad

I will begin my speech by talking about recent developments in and the outlook for overseas economies.

The pace of recovery in overseas economies has slowed. Uncertainties surrounding these economies have continued to be high (Chart 1). For example, one concern is that, with inflationary pressure still looming on a global basis, there may be a resurgence in inflation triggered by wage increases. In addition, the European and Chinese economies have been slow to recover and tensions in the Middle East have increased. The U.S. economy, despite the impact of policy interest rate hikes, has been firm, mainly due to resilient private consumption, and according to projections by the International Monetary Fund (IMF) is expected to grow by 2.7 percent in 2024. However, there is a risk that, if inflation resurges, tight monetary policy will become prolonged. European economies have kept slowing moderately due to the continued impact of factors such as policy interest rate hikes. There is concern over economic recovery being delayed in Europe due to factors such as the risk of a resurgence in inflation and economic stagnation in Germany. The Chinese economy has remained on a moderate slowing trend, reflecting structural changes in the economy leading to insufficient domestic demand and excess supply capacity. These changes are mainly due to adjustments in the real estate market, an aging population, and a rise in households' thriftiness. Looking ahead, uncertainty continues to be high, as adjustment pressure in the labor and real estate markets remains, and there is concern over heightening deflationary pressure and growing trade friction, mainly reflecting excessive supply in some goods.