OSAKA: The Japanese economy is facing a critical moment to see whether a positive cycle between wages and prices can be achieved, Bank of Japan Governor Kazuo Ueda said Monday.

“Japan’s economy has entered a critical phase in terms of realizing a virtuous cycle between wages and prices,” Ueda said in a speech in the western Japan city of Osaka.

“Changes have started to be seen in some aspects of firms’ wage- and price-setting behavior, but there are extremely high uncertainties as to whether these changes will become widespread,” he said.

At a press conference held after the speech, Ueda said there is “still a distance” from achieving the BOJ’s 2 pct inflation target.

Ueda said that once the central bank sees the prospect of achieving the inflation target on a sustainable basis, there will be the possibility of changing its monetary policy. “It’s going to be a very tough job, so we will deal with it appropriately.”

Ueda said that the price situation has turned somewhat upward, compared with when he took office nearly six months ago.

Because of the risk of a further rise in prices, the BOJ modified its monetary policy at its policy-setting meeting in July, he said. “It was an appropriate response.”

On the yen’s recent weakening, Ueda said that the BOJ will continue to carefully monitor how exchange rate movements affect the economic and price outlooks.

JIJI Press