BOJ Pushing Inflation Target Timeframe is a Reaction to Market Conditions

The Bank of Japan (BOJ) is unlikely to achieve its 2-percent inflation target during Gov. Haruhiko Kuroda’s term ending in April 2018, as the “Kuroda style” of policy decisions aimed at defusing the public’s deflationary mindset with aggressive targets appears to have hit a snag.

At a board meeting on Nov. 1, the BOJ decided not to further ease its monetary policy, a move that clearly reverses its strategy from waging a short-term battle to fighting a drawn-out battle to attain the 2-percent inflation target. It is evident the public’s expectations for the BOJ have taken a drastic step backward.

Asked about his responsibility over difficulties in achieving the 2-percent target during his term, Kuroda dodged the question at a news conference after the policy board meeting, saying, “It is a difficult question as to what is considered to be my responsibility.”

Kuroda was picked as BOJ chief in 2013 as a “last resort” to pull Japan’s economy out of chronic deflation. In April 2013, immediately after taking the helm of the central bank, Kuroda moved ahead with drastic monetary easing by doubling the money supply to the economy in two years, for example. He had declared that the central bank would “realize the 2-percent inflation goal in about two years.” It is extremely rare for a central bank to set a timeframe for achieving an inflation target that can be affected by global economic events. But Gov. Kuroda stated flatly, “We are mobilizing various means and I think we can achieve it.”

via Mainichi

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza