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BoJ's Amamiya Says Risk Aversion, Limited Pent-up Demand Keeps Inflation Low

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Japan’s inflation remained low while it surged in the United States and Europe due to strong risk aversion of Japanese households, and limited pent-up demand for private consumption, Bank of Japan Deputy Governor Amamiya Masayoshi said on Tuesday.

As a result, Japan’s real GDP still has not recovered to the pre-pandemic level seen in 2019, Amamiya said.

Amamiya noted that overall demand has been relatively weak in Japan, and demand shifts from services to goods have been somewhat slow. Japan therefore has not seen a surge in goods prices like the one observed in the United States.

“The current phase has once again brought to the fore the “norm” in Japan — that is, the Japanese-specific behavior of firms based on the assumption that prices will not increase easily,” he said. Further, supply-side constraints in Japan have not been as severe as in the United States and Europe.

Also, issues concerning the measurement of price indexes may also have a non-negligible impact on Japan’s inflation rate, the deputy governor added.

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