BoJ’s Asada: Rising oil prices put upwards pressure on inflation

Bank of Japan (BoJ) policymaker Toichiro Asada said during European trading hours on Wednesday that higher oil prices have prompted upside inflation risks.

Additional Remarks

That also weighs on growth, creating a stagflationary trend.

How to deal with stagflation situation is a hard question for monetary policy.

In general, policymakers can deal with such a situation with a mix of fiscal and monetary policy.

But it is hard to control the economy with monetary policy alone.

BoJ was able to focus on easy policy to end deflation previously.

But now Japan is experience inflation so that may not be the case.BOJ not targeting FX so not in a position to judge whether stronger or weaker yen would be desirable.

FX move as a result of monetary, fiscal policy decisions.

Market reaction

No immediate response by the Japanese Yen (JPY) after BoJ Asada's comments. As of writing, USD/JPY trades lower to near 158.50.