The No. 2 man at the Bank of Japan indicated Friday he holds a different view from other central bank policymakers who say the bank should end its ultra-easy monetary policy once core consumer prices stabilize.
"Since there are a variety of price indexes, it is important to assess not only the core consumer price index, but also other indexes, each of which has its own characteristic, when judging price trends," Deputy BOJ Gov. Toshiro Muto told business leaders.
His cautious comments come amid growing pressure from the government and some politicians to be more wary about ending the easy-money policy, also called quantitative monetary easing.
The central bank has kept the policy in place for more than four years to fight the economy's protracted deflationary trend. The bank has pledged to maintain the policy until the CPI, which excludes volatile fresh food, rises in a sustained manner and the Policy Board has agreed that the economy will not slip back into deflation.
"We should not just watch the surface movements of prices; we need to clarify the mechanisms behind price fluctuations," Muto said.
He added that setting up a framework for inflation targeting would be useful in making monetary policy transparent.
Last Friday, government data showed the CPI was flat in October compared with a year ago. BOJ policymakers and private economists forecast it to continue on a gradual uptrend.
But Muto noted that other data, including the GDP deflator, which includes imported goods, have a downward bias when oil prices rise. He also added that the core CPI in the United States excludes fuel prices.