Bank of Japan policy board member Seiji Adachi said Wednesday that he sees a greater chance that the nation’s inflation rate will increase after years of flat prices.
Adachi pointed out changes in Japanese companies’ price-setting behavior and improvements in their growth expectations.
“Now that the COVID-19 situation has started to calm down, firms are gradually beginning to raise the prices of their goods and services,” Adachi said in a speech.
“Some anecdotes suggest that the pandemic has motivated an increasing number of firms, especially those in the consumption-related industry, to change their ‘low-margin, high-turnover’ business models–which were quite common in the past–taking into account structural changes in customer needs,” he said.
Companies have become more active in business investment, which in turn suggests that they are willing to aim for higher profitability by raising the prices of their goods and services, Adachi said.
“The higher margins earned by firms through price rises could lead to wage increases and are expected to serve as a great catalyst for achieving the 2% price stability target,” he said.
Still, recent government data showed Japan’s consumer prices rose just 0.1% from a year earlier in October.