Japanese inflation should rise as the country's unemployment rate nears 2%, Bank of Japan board member Yutaka Harada said June 1, according to Reuters.
"Japan's jobless rate has already fallen to 2.8 percent. If this trend continues and the jobless rate falls further, there's no doubt prices will rise," Harada said.
While the Bank of Japan may register losses on its bond holdings when it does eventually tighten monetary policy, this will not have a significant negative impact as the bank will always make a profit in the long run by buying high-yielding government bonds using cash and current account deposits, he said.
Once tightening begins, the bank will sell its bond holdings and raise the interest it pays on excess reserves to mop up liquidity, he said.