Ueda Kazuo, the Governor of the Bank of Japan stated in a latest speech that Japan's economy has recovered moderately, with the materialization of pent-up demand, i.e., demand that had been suppressed during the pandemic, and a waning of supply-side constraints. In the household sector, private consumption has increased moderately and steadily, as pent-up demand has materialized, mainly for accommodations as well as eating and drinking. In addition, inbound tourism demand has recovered rapidly as entry restrictions to Japan have been lifted.
Turning to the corporate sector, activity for the nonmanufacturing industry has improved due to a recovery in private consumption. In the manufacturing industry, the favorable effects of an increase in automobile production, which reflects a waning of supply-side constraints for semiconductors, have spilled over to related industries.
He noted that the year-on-year rate of increase in the consumer price index (CPI, all items less fresh food) started accelerating last year, registering around 4% at the beginning of this year. The rate of increase subsequently decelerated, due in part to the government's economic measures pushing down energy prices, but that for August -- the latest figure -- was still at 3.1%. He opined that the bank's basic thinking on the conduct of monetary policy is that it is necessary to patiently continue with monetary easing under the framework of yield curve control.
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