Overall risks to the Japanese economy on the whole are balanced, Bank of Japan Policy Board Member Sayuri Shirai said Thursday. But the central bank should pay greater attention when consumption tax is raised, she said.
In a speech to business leaders in Asahikawa, northern Japan, she said consumption tax should be introduced as scheduled from April 2014 but she expressed concern about the possibility of the actual inflation projected for fiscal 2014 exceeding the rate anticipated by households.
The revision in tax with price increases may lead to a decline in the real household income. "The risks are tilted somewhat to the downside, particularly with regard to the responsiveness of prices to the output gap," Shirai added.
She expects markets to stabilize over time. "The Bank continues to closely monitor market developments within a flexible operational framework and through discussions with market participants, and it expects that both short- and long-term interest rates will move largely on a stable path," Shirai said.
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