If falling oil prices dampen inflation expectations and it is judged difficult to achieve 2 percent inflation, a monetary policy response will be necessary, Bank of Japan Deputy Governor Hiroshi Nakaso told business leaders in Ehime on Monday.
"If falling oil prices lower inflation but inflation expectations remain unaffected and inflation keeps heading toward 2 percent as a trend, there is no need to respond through monetary policy," Nakaso said.
The bank did not embark on additional easing as an automatic response to falling crude oil prices, he said.
With the annual growth in consumer prices being sluggish due mainly to falling oil prices, the BoJ carried out additional easing to preempt the manifestation of any risk that the conversion of the deflationary mindset might be delayed.
The bank will make adjustments as necessary to achieve the price stability target at the earliest possible time, if there are changes in the underlying trend in inflation, Nakaso added.
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