Kazuo Ueda: Achievement of the 2 percent price stability target and Japan's economy

Speech by Mr Kazuo Ueda, Governor of the Bank of Japan, at the Meeting of Councillors of Keidanren (Japan Business Federation), Tokyo, 25 December 2024.

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

Central bank speech  | 
14 January 2025

Introduction

It is a great honor to have this opportunity to address such a distinguished gathering of business leaders in Japan today.

At last year's Keidanren meeting, I said that the likelihood of achieving the Bank of Japan's price stability target of 2 percent in a sustainable and stable manner seemed to be gradually rising. Since then, thanks largely to the determination of corporate senior executives, significant wage hikes were achieved in the 2024 annual spring labor-management wage negotiations. Reflecting these hikes, real wages have been on an improving trend and private consumption, which had been relatively weak, has also shown signs of improvement. In terms of prices, upward pressure stemming from the rise in costs of imported materials has gradually waned. Meanwhile, prices of a wide range of goods and services have begun to rise moderately, in reflection of the increase in wages. Against this background, the Bank changed its large-scale monetary easing framework last March, discontinuing the negative interest rate policy and yield curve control. Then, in July, the Bank decided on a plan for the reduction of its purchase amount of Japanese government bonds (JGBs) and raised the target level of the short-term interest rate to around 0.25 percent. I believe that 2024 has been a year of steady progress toward achieving the price stability target in a sustainable and stable manner, with a virtuous cycle between wages and prices gradually intensifying.