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ECONOMY > Economic Policy

Inflation target seen eluding BOJ’s Kuroda during his tenure

  • October 15, 2016
  • , Nikkei Asian Review , 5:10 a.m.
  • English Press

TOKYO — The Bank of Japan likely will cut its inflation forecast for the year ending in March 2018, making the 2% rate target all but impossible to achieve before Gov. Haruhiko Kuroda’s tenure ends in April of that year.

 

The central bank projected price increases of 1.7% for fiscal 2017 in its most recent quarterly economic and price outlook, published in July. The bank’s policy board is expected to downgrade the figure to the low- to mid-1% level at its two-day meeting through Nov. 1.

 

The board in July had even predicted that as price increases accelerate, inflation would reach 2% on a monthly basis toward the end of fiscal 2017.

 

But the rise in wages, which had been hailed as an engine behind price increases, turned out to be mild, prompting consumers to keep a tight grip on their wallets. This discouraged businesses from hiking prices, resulting in the slower inflation rate than the BOJ had hoped.

 

It is “a fact” that achieving the 2% target has been pushed further down the road, in the words of policy board member Yutaka Harada.

 

The central bank says it is ready to launch an additional round of easing should there be a disruption to the price trend toward 2%. But with crude oil prices climbing, the upward trend is expected to gain traction. The direction of the momentum toward 2% “has not changed,” an official said. Kuroda himself said Oct. 8 that he didn’t think additional easing was necessary, in part on hopes for the government’s economic measures.

 

Still, the 2% goal is unlikely to be reached while Kuroda is in office. One idea for the timeline would have the quarterly outlook report predict 2% inflation in fiscal 2018.

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