By Leika Kihara

TOKYO (Reuters – Japan’s consumer inflation could rise and keep within the 2% goal for a long time if Ukraine war continues, Bank of Japan policymaker Goushi Cataoka stated on Thursday.

According to him, such inflation is likely to be driven more by external factors than strong domestic demand. Therefore, there’s no reason why the Bank of Japan should tighten its monetary policy.

Kataoka said that “there’s a chance inflation will exceed 1.5% due technical factors” and would stay at this level for a longer period. He has always been the only proponent of greater stimulus.

Japan does not have the momentum needed to sustain 2% inflation. The BOJ has not yet indicated that it is going to tighten.

Although supporting the economy is still a top priority, fighting inflation remains a secondary concern. However, BOJ policymakers paid more attention to increasing inflationary pressures before Russia invaded Ukraine on February 24th.

The January meeting of bank board members was a success. They agreed that consumers inflation could exceed their expectations if rising costs are passed on faster than anticipated, the minutes showed.

A lot of companies don’t want to stick with business models that were effective in deflation. According to one source, they may see inflationary pressure rise as they alter their behavior in setting prices.

One member noted that stocks prices have risen for those companies which raise their prices. “Price increases may widen, and increase medium-to-long-term inflation expectations.”

Japan is behind other developed nations when it comes to recovering from the pandemic slump. The current quarter has seen slowing economic growth due to low consumption.

The survey that was released Thursday revealed that Japan’s manufacturing activity picked up as a result of falling COVID-19 case numbers, which helped to lift orders.

However, rising fuel and grain prices are causing severe pain to Japan’s resource-poor population. This casts doubt on BOJ’s belief that Japan’s third largest economy will experience a modest recovery.

Core consumer inflation is expected to rise near 2% over the next few months, according to many analysts. It was 0.6% in February.

Fumio Kirishida, Prime Minister under pressure to spend more ahead of the election for the upper house, is likely to instruct his cabinet Tuesday to put together a relief plan to offset rising raw material costs.

This is contrary to U.S. Federal Reserve plans to take aggressive interest rate increases. This gap has caused the yen’s to plunge to six years against the dollar. It also causes pain for households as it inflates import prices.

Kataoka claimed that a weakening Japanese yen is good for the entire economy. He also said the detractors were minimal when considering factors such as exports being boosted by the weaker yen.