Recent Observations

This week there have been quite a few news stories regarding the BOJ, Bank of Japan, and their downgrading of their inflation goal of 2%. A 2% inflation goal, it seemed was never really achievable in the time frame they wanted. Reason being, it takes time for businesses to raise wages, for employees to feel the effects of those wages, and for consumers in the economy to begin to feel some benefits.

After the sales tax last April the 2% goal became even more unrealistic. However, just because it hasn't been achievable yet, doesn't mean its not a doable goal. You have an economy that has been entrenched in deflation for a number of years. You have a economy with a mindset that, for the most part, has become less that optimistic, which many times, results in an economy that is not operating at full potential. You have an economy while still  # 3 in the world, with a huge output, is nowhere near where it should be.

It will take time for potential wage increases, fiscal stimulus, monetary stimulus, and increased or improved consumer mood to really see an affect.

So the BOJ changing or admitting that 2% inflation is not doable just yet is not a failure on the part of the BOJ, it just realizes there are still too many forces at work that need to improve before increased demand and more inflation becomes a real part of the Japanese economy.

© 2015 Tom Metts,  all rights reserved