BOJ must keep easy policy even as prices rise - senior govt official


TOKYO (Reuters) - The Bank of Japan must maintain its massive monetary stimulus as dealing with cost-push inflation with policy tightening would be difficult, deputy chief cabinet secretary Seiji Kihara said on Sunday.

Prospects of steady U.S. interest rate hikes and the BOJ's pledge to keep monetary policy ultra-low have pushed the yen to multi-year lows against the dollar, a move that inflates Japan's already rising cost for importing fuel and raw material.

"It's hard to tighten monetary policy to deal with cost-push inflation, which means monetary policy must remain loose," Kihara told a television programme.

"Fiscal policy must therefore play a role," in cushioning the blow from rising fuel and other living costs, he said.

Prime Minister Fumio Kishida has said the government will compile a fresh relief package by the end of April to mitigate the burden on households and companies from rising prices.

The package will include steps to ease the strain from rising oil prices and help firms pay higher wages, Kihara said.

Subsidies are among tools that can flexibly deal with the immediate hit from rising prices, though tax cuts would not be ruled out in deliberating the package, he said.

(Reporting by Leika Kihara; Editing by Daniel Wallis)

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