Bank of Japan drops inflation timeframe, but says target unchanged

The Bank of Japan has struggled to achieve its longstanding inflation target of 2.0 percent despite steady economic growth

Tokyo (AFP) – The Bank of Japan on Friday dropped its timeframe for achieving a longstanding inflation goal, but its governor insisted his commitment to the elusive two-percent figure was “unchanged.”

The central bank has already pushed back its deadlines six times since governor Haruhiko Kuroda took office in 2013, and on Friday it simply removed reference to its most recent goal of reaching that inflation level around the fiscal year to March 2020.

At a press conference, Kuroda said the removal was not an indication that the goal no longer stood, adding that he believed the deadline was still achievable.

“The Bank of Japan’s median outlook that the rising rate will improve to about two percent around fiscal year 2019 has remained unchanged,” he said.

The timeframe was removed “in order to clarify it as an outlook, not a target period”, he added.

“We are not carrying out monetary policies based on a particular target period,” Kuroda told reporters.

Japan has racked up the longest period of GDP expansion since the “bubble” boom days of the late 1980s, but reaching the two percent inflation thought crucial to turbocharging the economy has proved a struggle.

The BoJ said Friday it was holding steady on monetary policy, continuing to purchase 10-year government bonds so that long-term interest rates would remain “at around zero percent”.

It has shown little inclination to exit the policy, despite moves in that direction by other central banks.

“Although the year-on-year rate of increase in the CPI has been accelerating gradually, it has continued to show relatively weak developments compared to the economic expansion and the labour market tightening,” the BoJ said in its report.

Hideo Kumano, chief economist at Dai-ichi Life Research Institute, said the BoJ appeared to have removed the timeline in a bid to ease pressure as it looks to explore a timeframe for exiting its ultra-loose policy.

“Kuroda appears to seek a free hand on policies by deleting the target period,” Kumano told AFP.

Kuroda took the helm in March 2013 with a licence to deploy what was called a monetary “bazooka” to revive the moribund economy.

He has overseen a policy of ultra-aggressive monetary easing, adopting in January 2016 the BoJ’s first-ever negative interest rates — effectively charging lenders to park their cash at the central bank.

“It is appropriate for the Bank of Japan to persistently continue the current powerful easing policies,” Kuroda told reporters Friday.

Japan said last week its consumer prices edged up 0.9 percent in March, but inflation was slightly weaker than the previous month and still far below a longstanding target.