BOJ More Confident of 2% Inflation Target

The Bank of Japan appears to be growing more confident of hitting its 2% inflation target, with the minutes of a recent policy board meeting showing that members see Japanese firms abandoning their strategy of keeping retail prices low and becoming more willing to raise them.

The minutes of the central bank’s April 30 policy board meeting provided insight into why the BOJ maintained its bullish inflation view in its latest growth and price forecast report, brushing aside the skepticism of private economists.

The central bank’s nine policy-setting board members “shared the recognition” that a shift in firms’ price-setting strategy from keeping prices low to raising them “had started to be seen,” the minutes said.  A few members noted that “the responsiveness of inflation to the output gap” has been rising.  Some also said some firms had started to pass rises in costs directly onto sales prices on the expectation Japan’s economy will stay on a recovery track.


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