BoJ sounds concern over inflationary pressures

The Bank of Japan gave cautious hints of a shift in its interest rate policy yesterday, though analysts stressed that a move away from the country's zero-rate policy is unlikely to be imminent.

The Bank of Japan gave cautious hints of a shift in its interest rate policy yesterday, though analysts stressed that a move away from the country's zero-rate policy is unlikely to be imminent.

Minutes from the central bank's policy-setting meeting last month showed that the BoJ was on the alert for signs of inflation in the wake of the recent surge in international commodity prices.

Japan has insisted it would maintain a zero interest rate policy in response to falling prices until there was a sustained return to consumer price inflation over several quarters.

At last month's meeting, the bank's policy board called for close monitoring to see whether price rises in commodities and producer goods were being passed down to consumer prices, although there had been little evidence of this so far.

The BoJ's concerns were revealed yesterday amid mounting signs of a return of inflation in the US and expectations that a rate rise could come sooner than expected.

The key US consumer prices index rose by 0.5 per cent in March, data showed yesterday, while the core CPI index, which excludes volatile food and oil prices, recorded its highest rise since November 2001, gaining 0.2 per cent. The data bolstered a growing conviction that a long period of historically low interest rates could end sooner than was thought just weeks ago.