Pedestrians walk past the Bank of Japan building on March 18, 2024 in Tokyo, Japan.
11:25 JST, November 10, 2024
TOKYO (Reuters) – The Bank of Japan (BOJ) hopes to maintain its 2% inflation target even if climate change causes long-lasting shocks to future price developments, Governor Kazuo Ueda said on Saturday.
But Ueda said the BOJ will “carefully monitor” how the economic impact of climate change, as well as the consequences of government measures to promote the green transition, could affect inflation expectations.
“We would like to keep the inflation target at current levels” even if climate change shocks occur, Ueda said at a conference in Basel, followed by a live YouTube feed. “But of course I worry about what it will do to inflation expectations.”
Japan is likely to implement a carbon tax sometime in the future, which could impact inflation expectations, Ueda said at the conference, which was held to discuss the impact of climate change on the economy and monetary policy.
Government subsidies to promote the green transition may also create inflationary pressures in the short term, although Japan can “absorb such inflationary forces for a while” as underlying inflation is currently still below 2%, he said.
Under its green transition strategy, the Japanese government will provide fiscal support worth 20 trillion yen ($131 billion), or 3% of the country’s gross domestic product (GDP), over the next decade to companies that invest in environmentally friendly technology.
In the second phase of the strategy, the government plans to introduce carbon pricing and operate a full-fledged emissions trading system in the 2026 financial year, and impose a fossil fuel surcharge in the 2028 financial year.
The conference was co-organized by the Bank for International Settlements, the BOJ, the Bank of Spain and the Network for Greening the Financial System.
($1 = 152.6300 yen)
