BoJ Governor Ueda says supply shocks loom large in everyone's mind and they are not new but have become more frequent

Says:

• Warns energy shocks may become more persistent.
• Central banks should not look at oil prices in isolation.
• Same oil price increase can have very different effects depending on wages, expectations, demand, and exchange rates.
• If inflation expectations are already high and wages are accelerating, the risk of second-round effects is large.
• If expectations are very low and wages are stagnant, even a large cost shock may not raise underlying inflation.
• The boundary between temporary and persistent inflation is not mechanical, and a temporary shock can become persistent if it changes wages, expectations, and price-setting behaviour, while a large shock can remain temporary if those channels do not activate.