Three of the nine members of the Bank of Japan’s (BOJ) policy board have cast doubt on the feasibility of reaching its 2 percent inflation target, minutes revealed yesterday.
During their gathering last month, at which the central bank slashed its inflation outlook, the three pointed to falling oil costs and stagnating prices.
“One member expressed the recognition that it was rather unlikely that the 2 percent target would be achieved in a sustainable manner, given that the year-on-year rate of increase in the CPI [Consumer Price Index] had recently been in the range of between 0 and 0.5 percent, despite the yen’s depreciation,” the minutes said.
Following the meeting, the BOJ said inflation for the year starting in April would come in at 1 percent, well down from an earlier 1.7 percent forecast.
In this month’s meeting, the bank cut back its assessment of the current state of inflation, adding to the impression that its self-imposed targets are increasingly out of reach.
Japan has suffered mild deflation for nearly two decades, crippling the economy as consumers endlessly delay purchases in the knowledge that prices will be lower in the future.
Japanese Prime Minister Shinzo Abe came to power promising to reverse the trend, with a mix of fiscal largesse from his government, and monetary easing directed by his hand-picked central bank governor, Haruhiko Kuroda.
However, because the issue is fundamentally one of confidence, growing doubts about the bank’s ability to hit its 2 percent target could easily be self-fulfilling.
The BOJ’s post-meeting statement this month said that inflation, excluding the effects of a sales tax rise, was hovering at about 0.5 percent, down from an earlier range of between 0.5 and 1 percent that the bank used last month.
That underscores the difficulty in reaching the target by early next year.
The sales tax rise in April has been blamed for bringing once-growing consumer spending to a shuddering halt, plunging the economy into recession and throwing the success of “Abenomics” — the prime minister’s keystone economic drive — into question.
Kuroda has repeatedly said that the bank was still on track to reach its goals, and that the BOJ never said it would hit its goal in exactly two years.
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