Ueda on five energy shocks: oil prices test the whole inflation regime

Serguey Asael Shinder12 October 2026, 08:282 min read

The Bank of Japan flagged new papers in its IMES Discussion Paper Series on 9 October; among the latest is No. 2026-E-12, a summary of the 2026 BOJ-IMES Conference, "Monetary Policy from New Perspectives", held on 27–28 May. The paper, by Yusuke Oh, Daisuke Ikeda and Yojiro Ito, is dated September and states that the views are those of participants, not of their institutions.

Ueda: five energy spikes, five different outcomes. Governor Kazuo Ueda opened by comparing the five large energy price spikes Japan has faced since the 1970s.

• The 1973 oil shock hit an already overheated economy and produced a classic wage-price spiral; wages were the most important channel, and tightening came only after high inflation had taken hold.
• The 1979–80 shock caused far milder inflation: policy responded faster, inflation and wages started lower, firms and unions had learned from 1973, earlier yen appreciation cushioned import prices, and firms had begun cutting oil dependence.
• The oil price rise of the mid-to-late 2000s barely moved underlying inflation because Japan was by then in a deflationary equilibrium; it acted mainly as a tax on real incomes.
• From around 2021, the cost shock proved not temporary: price rises broadened, firms passed costs on more readily, and wages and expectations moved up — but without a 1970s-style spiral, as medium- to long-term expectations rose only from near zero to around 1.5–2%.

His conclusion, as summarised: central banks should not view oil prices in isolation, the line between temporary and persistent inflation is not mechanical, and oil price shocks are tests of the entire inflation regime. He noted that the fifth such spike is under way now.

Kohn on independence. Donald Kohn of the Brookings Institution, a former Federal Reserve vice chair, gave the Mayekawa Lecture. He said threats to central bank independence in the United States have reached levels not seen since the 1951 Fed-Treasury accord, and that the concern extends beyond the U.S. His prescription for central banks: focus on core legal objectives and avoid contested side goals, succeed at them, and communicate clearly. On fiscal risks, he argued central banks should explain the consequences of unsustainable debt without prescribing how elected officials should close the gap; on financial stability, they should state their own assessment candidly even when it differs from the government's.

The conference also included a keynote by Markus Brunnermeier and a fireside chat on supply shocks with Philip Jefferson of the Fed, Philip R. Lane of the ECB and Ryozo Himino of the BOJ.

Source: IMES Discussion Paper 2026-E-12 — https://www.imes.boj.or.jp/research/papers/english/26-E-12.pdf