TOKYO, May 27 (Xinhua) -- Bank of Japan (BOJ) Governor Kazuo Ueda said Wednesday that the global economy has been hit by significant spikes in energy prices since the 1970s, and the world is now facing a fifth "oil price shock."
Speaking at an international conference in Tokyo, Ueda said Japan's consumer prices have responded differently to oil price increases across various periods, meaning that central banks should not view oil prices in isolation, as the same oil price increase can have very different effects depending on wages, expectations, demand and exchange rates.
Ueda further explained that a temporary shock can become persistent if it changes wages, expectations and price-setting behavior. Conversely, a large shock can remain temporary if those channels do not activate.
Drawing on Japan's previous experience, Ueda concluded that oil price shocks are never just oil price shocks, but are tests of the entire inflation regime.
Persistently high international energy prices, driven by ongoing tensions in the Middle East, have triggered a supply crunch in oil-derived raw materials, sending ripple effects through Japan's economy and prompting a growing number of food and beverage companies to raise prices.
The BOJ is scheduled to hold its next monetary policy meeting on June 15 and 16 to decide whether to raise its benchmark interest rate, currently at around 0.75 percent.
Although the central bank kept the rate unchanged at its April policy meeting, three of its nine policy board members have called for a rate hike to curb inflation. ■