By Leika Kihara
TOKYO Bank of Japan board member Hajime Takata said on Wednesday he saw early signs of change in the public's long-held perception that wages and inflation won't rise much.
"Personally, I believe Japan's economy is finally seeing early signs of achieving the BOJ's 2% inflation target," Takata said in a speech.
While recent inflation is driven mostly by higher import costs, the increase in prices prodded many companies to hike pay to compensate employees for rising living costs, he said, adding that such wage increases could continue into next year.
"We need to patiently maintain the current massive monetary stimulus," Takata said.
"At the same time, we need to respond nimbly against uncertainties as we're seeing early signs of a positive cycle emerge" between wages and inflation, he said.
With inflation exceeding the BOJ's 2% target for more than a year, markets are simmering with speculation the central bank will soon dismantle the radical stimulus programme of former Governor Haruhiko Kuroda.
Japan's core inflation hit 3.1% in July, exceeding the BOJ's 2% target for the 16th straight month. Firms also promised wage hikes unseen in three decades this year, heightening the case for a retreat from decades of ultra-loose monetary policy.
BOJ officials have said the central bank must keep interest rates ultra-low until robust domestic demand and sustained wage growth replace rising import costs as key drivers of inflation.
(Reporting by Leika Kihara; Editing by Jacqueline Wong and Tom Hogue)
