Governor Ueda of the Bank of Japan Issues a Warning That High Food Prices Could Continue, Affecting Inflation Expectations

The governor of the Bank of Japan cautions that food prices could continue to rise, which would affect inflation expectations and influence monetary policy choices.

As the central bank continues to manage its monetary policy, Bank of Japan Governor Kazuo Ueda has cautioned that food prices may stay high, which might have an impact on consumers’ inflation expectations. 

“We are acutely aware that people’s lives are being adversely affected by a price increase of over 2% for fresh foods and other frequently purchased goods,” Ueda told lawmakers. 

He pointed out that price rises for fresh commodities in particular could not be short-term and could affect how the general population views inflation. “There’s a chance that this will affect people’s mindsets and price expectations, and increases in the prices of food, including fresh food, won’t necessarily be temporary,” he stated. 

Ueda made these remarks after the BOJ signaled confidence that the economy is headed toward wage-driven and sustainable price increases by raising short-term interest rates to 0.5% last month, the highest level in 17 years. 

In December, the total [consumer price index] (w) (CPI) increased 3.6% over the previous year, outpacing the core index’s 3.0% growth, which does not include the fluctuating costs of fresh food. 

Price increases for fresh vegetables and grains were the main causes of the increase. But according to Ueda’s earlier remarks, these cost-push inflationary pressures should subside by the middle of the year. 

After excluding short-term variables like gasoline and fluctuating fresh food costs, the BOJ considers underlying inflation patterns when assessing whether inflation is headed toward its 2% objective in a sustainable manner. 

Ueda reaffirmed that financial stability, inflation patterns, and economic circumstances will all affect how quickly interest rates rise in the future. Additionally, he affirmed that the BOJ would present a new framework for April 2026 onward and carry out a mid-term assessment of its bond reduction strategy in June. 

“To ensure the stability of bond markets, we have developed and are executing our bond-taper plan based on the belief that tapering should be carried out in a predictable manner with a certain amount of flexibility,” Ueda stated. 

As part of its larger goal to normalize monetary policy, the BOJ said in July that it will cut its monthly purchases of Japanese government bonds in half, to 3 trillion yen ($19.52 billion) by January–March 2026.