Japan Inflation Target Should be less than 2%

The Bank of Japan should give itself more time to achieve its ambitious price target, board member Takahide Kiuchi said, warning that an appropriate level of inflation for Japan is currently lower than the bank’s 2 percent target.  The remarks by Kiuchi, who has long been skeptical of the central bank’s radical stimulus program, contrast with Governor Haruhiko Kuroda’s conviction that Japan is on course to meet the inflation target during the year beginning in April.

Kiuchi repeated his calls for watering down the two-year timeframe for meeting the inflation target, warning that Japan will see prices rise only gradually given the economy’s low growth potential.  “Inflation may reach 2 percent at some point in the future if, as hoped for, structural reforms progress and boost Japan’s growth potential,” the former market economist told business leaders in Maebashi, a city north of Tokyo, on Thursday.

“But it’s important to guide policy based on the understanding that an appropriate level of inflation for Japan now is lower (than 2 percent),” he said.  Stripping away the effect of last year’s sales tax hike, the core consumer price index – which excludes volatile food but includes oil costs – rose just 0.2 percent in the year to January, slowing from 0.5 percent in December.

Reuters

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