Japan’s central bank has stumbled into a rare public relations storm that has dragged debate about its ultra-low interest rates out of sterile boardrooms and into tabloid and social media, amid surging household ire over rising living costs.
Bank of Japan Governor Haruhiko Kuroda issued an unprecedented public apology and retraction earlier this month after comments that households were more “accepting” of retail price hikes triggered a flurry of angry tweets.
Those concerns come amid broader questions about the credibility of central banks globally, which have drawn public fire recently for underestimating the inflationary hit to consumers and businesses from supply chain disruptions and the Ukraine war. “Needless to say, we have no choice but to buy food and daily necessities even if their prices soar. People are absolutely not accepting price hikes,” wrote another tweet.After almost a decade leading efforts to shock Japan out of deflation with a wall of money, Mr. Kuroda has finally accomplished his mission: he has stopped an economically debilitating rise in the yen and propped up inflation to his 2% target.That’s because inflation is rising for the wrong reasons.
“Japan is inherently a country less tolerant of price hikes, so even a small rise in inflation triggers a big public response,” said Izuru Kato, chief economist at Totan Research. BOJ officials say the speech was intended to explain the need for wages to rise more to ensure households can keep paying more. That message was lost when newspaper headlines focused on his comments about households accepting price rises, rather than his arguments for pay hikes.
The BOJ lacks a playbook on how to deal with such cases beyond apologizing to politicians and clarifying its intentions at Kuroda’s public appearances, they said. Public discontent over Mr. Kuroda also risks undermining the BOJ’s credibility and leaves it vulnerable to political attack.
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