Bank of Japan Gov. Kazuo Ueda said Saturday that government subsidies for decarbonization investment are likely to create some inflationary pressure in the short term.
The upward pressure on prices can be absorbed for a while if underlying inflation remains below 2%, he also said at a debate held in Basel, Switzerland, by organizations including the Bank for International Settlements.
Still, Ueda said that monetary tightening would become necessary if inflationary pressure exceeds a certain level.
Ueda and other participants, including European Central Bank President Christine Lagarde, discussed issues such as the impacts of challenges from climate change on real economic activities and monetary policy.
The Japanese government has set a target for the public and private sectors to spend a total of over ¥150 trillion over the next 10 years to promote decarbonization.
It aims to procure about ¥20 trillion of the total through the issuance of a new type of government debt securities called green transformation economy transition bonds.
Ueda said that fiscal support from the Japanese government is expected to accelerate decarbonization-related capital spending and research and development in the private sector, thereby boosting the country's economy.
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