The country's core consumer prices are likely to rise steadily as fiscal 2006 draws closer, which will give the Bank of Japan the green light to end its ultraloose monetary policy, BOJ Gov. Toshihiko Fukui said Friday.
Fukui reiterated that the central bank will maintain its so-called quantitative easing policy until the core consumer price index rises in a sustained manner and there is a consensus among board members that the economy will not slip back into deflation.
The core CPI, which excludes volatile fresh food prices, has been declining on a year-on-year basis for more than seven years.
"The year-on-year changes in the CPI are expected to stabilize in the positive area," as the effects of special factors, including a decline in rice prices and in electricity and telephone charges, dissipate, Fukui said in a speech to economists and business leaders.
"I feel a sense of urgency (to end the ultraeasy policy), but we will wait until the CPI shows steady plus figures," he said.
Fukui also said the current policy, under which excess funds are flooded into the money market with interest rates kept effectively at zero, is not normal because it has canceled out the effect of monetary policy that usually comes from adjusting short-term interest rates.