By Leika Kihara and Francesco Canepa

KOENIGSWINTER in Germany (Reuters) – Having walked a similar course in tackling low inflation, Japan, Europe and other countries now seem to have different approaches to monetary policy. They also face rising price risks, which drew alarms during this week’s Group of Seven gathering.

Haruhikokuroda, Bank of Japan Governor reiterated Friday his dovish mantra that recent inflation caused by cost-push will only last a few days and won’t warrant the withdrawal of stimulus.

Kuroda, one of the G7 finance chiefs’ meetings said that “there’s no change in our view it’s proper to maintain our yield control policy. This includes negative interest rates.”

Kuroda’s comments were in contrast to those made by European officials, who have become increasingly worried about inflation and are willing to commit to rates increases.

Joachim Nagel from the European Central Bank, a policymaker at the bank, stated that it was certain that negative rates of interest are the future.

“The truth is that the inflation dynamics have drastically changed within a very short time period. Therefore, most G7 nations have seen a change in monetary policies.

The G7 finance leaders communique stated that the United States is also having difficulty taming soaring inflation. They said the central banks should adjust the rate of monetary tightening so as to combat inflation at “levels never seen in decades”.

Christian Lindner, the German Finance Minister, chaired G7.

For the first time since 2007, Japan’s core consumer inflation was only slightly higher than the 2% BOJ target for April.

However, this is a small amount compared to the record eurozone inflation in April which was 7.4%. This figure exceeds even the 2% target of ECB, despite the fact that there has been an astronomical increase in energy prices and food prices.

Kuroda claims that Japan’s slow wage increase and sticky deflationary outlook would stop inflation rising too much.

However, Europe’s experience highlights the danger in being complacent regarding the possibility of inflation widening.

Inflation was grossly under-estimated by the ECB last year. However, they have played down fears of rising price pressure for many months.

Christine Lagarde, President of the ECB, had previously ruled out any rate increases as recent as December. However she abruptly changed her mind and opened the doors to the first rate increase in more than a decade.

Analysts believe that the key to Japan’s ability to exit extraordinary stimulus is dependent on how inflation prospects will play out and what happens with the yen.

Japanese policymakers are concerned about the recent drop in the value of the yen below 130 per dollar, which has caused it to fall to an all-time low for over two decades.

“The (BOJ) will raise the yield target at some point but it’s hard to see that happening now,” said Kit Juckes, a macro strategist at Societe Generale (OTC:), pointing to Japan’s weak economy and “incredibly well-anchored” inflation expectations.

“I would have expected the Japanese authorities to want the yen to remain stable between 120 and 130,” he added, noting that the BOJ may have to adjust its policies if the currency falls below 140.