By Leika Kihara

TOKYO (Reuters] -The Bank of Japan has to maintain its large monetary stimulus, as inflation has not sustainedably reached its 2% target. Masazumi wakatabe, the deputy governor of Bank of Japan, said Wednesday. She stressed that it is important to provide a favorable environment for wages to rise quicker.

Wakatabe stated that Japan’s current cost-push inflation was due to rising fuel costs and not strong demand.

Wakatabe spoke in support of Wakatabe’s statement that rising food and energy costs are caused primarily by outside cost-push factor. Therefore, other than monetary policy it would be desirable to address them.

Wakatabe was a former academic who is known for advocating aggressive monetary ease.

Although the BOJ is an exception in its commitment to keeping monetary policy loose, other central banks are raising interest rates to counter rising inflation.

Analysts predict rising fuel and material costs will keep Japan’s core consumer inflation, which was 2.1% in April (roughly 2%) at the target of the central bank for most or all of 2011.

Wakatabe stated that simply having inflation reach 2% over six months or one year does not mean you have achieved the BOJ’s price target. Rather, such price increases must be supported by greater wages.

“The important thing is to see if there are big changes in service prices and if wages will go up. “We must also determine if inflation expectations are stable at 2%,” said he.

Wakatabe also warned about the risks Japan’s economy faces due to supply disruptions from China’s COVID-19 restrictions and potential market volatility following U.S. interest rates hikes.

He stated that Japan’s greatest worry, despite Japan being in the forefront of other nations, was still “low growth, low interest rates and low inflation”.

Wakatabe spoke out, saying that “if there are risks to our economy, the BOJ cannot rule out taking further easing steps without hesitation.” However, he added that it was not necessary for us to act immediately.