Bank of Japan Governor Ueda Warns High Food Prices May Persist, Impacting Inflation Expectations

Bank of Japan Governor, Kazuo Ueda has warned  that food prices may remain high, potentially affecting consumers’ inflation expectations, as the central bank continues to navigate its monetary policy.  

“We’re deeply aware that a rise of more than 2% in prices of fresh foods and other commonly purchased products are negatively impacting people’s lives,” Ueda told parliament.  

He noted that food price increases, including fresh foods, may not be temporary and could influence public perceptions of inflation. “Rises in the prices of food, including fresh food, won’t necessarily be temporary, and there’s the chance that this will impact people’s mindsets and price expectations,” he said.  

Ueda’s comments come after the BOJ raised short-term interest rates last month to 0.5%, the highest level in 17 years, signaling confidence that the economy is on track for wage-driven and sustainable price increases.  

The overall [consumer price index](w) (CPI) rose 3.6% in December from a year earlier, surpassing the 3.0% gain in the core index, which excludes volatile fresh food prices. 

The increase was primarily driven by a surge in fresh vegetable prices and higher rice costs. However, Ueda has previously stated that such cost-push inflationary pressures are likely to ease toward the middle of the year.  

In determining whether inflation is on a sustainable path toward its 2% target, the BOJ prioritizes underlying inflation trends, stripping out temporary factors such as fuel and volatile fresh food prices.  

Ueda reiterated that the pace of future interest rate hikes will depend on economic conditions, inflation trends, and financial stability. He also confirmed that the BOJ will conduct a mid-term review of its bond tapering plan in June and introduce a new framework for April 2026 onward.  

“We’ve formulated and are implementing our bond-taper plan based on the view that tapering should be done in a predictable manner with a certain degree of flexibility to ensure the stability of bond markets,” Ueda said.  

Last July, the BOJ announced plans to halve its monthly purchases of Japanese government bonds to 3 trillion yen ($19.52 billion) by January-March 2026, as part of its broader strategy to normalise monetary policy.

Boluwatife Enome

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