By Leika Kihara

TOKYO (Reuters), -Japan will not slide into stagflation – A condition in which both rising inflation or shrinking economic growth coexist, a high-ranking central bank official claimed on Wednesday.

According to Seiichi Shimzu, chief of Bank of Japan’s monetary affairs department, consumers will see an increase in inflation as the Ukraine crisis triggers sharp rises of energy and commodity prices.

“But, we don’t anticipate Japan to experience a stagflation like situation,” he said. This is defined as the combination of increasing inflation and contraction in economic development.

He stated that Japan will see a recovery as service consumption is less affected by the coronavirus pandemic. This support comes in addition to solid external demand.

These comments come in advance of the BOJ’s policy meeting next Wednesday. It suggests that while the central bank is sticking to its projection of moderate economic recovery and acknowledging rising inflationary pressure due to the recent rise in energy prices, the BOJ will not change its projection.

According to a January assessment, the BOJ projects that consumer inflation will “accelerate” due to companies passing on increasing raw material costs to consumers.

Shimizu noted that although rising commodity and grain prices may cause food and energy prices to rise in the near-term, they will also have a negative impact on the economy over the long term through an increase in corporate profits and household income.