Bank of Japan: Inflation Target

 https://mainichi.jp/english/articles/20210422/p2a/00m/0bu/024000c

Article:

TOKYO -- The Bank of Japan (BOJ) is set to present an inflation forecast of around 1% for fiscal 2023 at monetary policy meetings to be held on April 26 and 27, which will result in its failure to achieve a 2% inflation target during BOJ Gov. Haruhiko Kuroda's term, which ends April 8, 2023, even after efforts lasting 10 years.

The BOJ discloses inflation forecasts for the next three years in quarterly reports titled "Outlook for Economic Activity and Prices." In the report to be presented at the April meetings, the central bank analyzed that forces pushing price levels up have weakened due to the economic downturn amid the coronavirus pandemic. Among BOJ officials, there is a prevailing view that "a major increase in prices is difficult to achieve."

Ideas:

The Bank of Japan should not be too concerned at this present with inflation or with the 2 percent inflation target.

The main goal of the Bank of Japan should be to continue to help small and medium sized businesses to get through the pandemic.

Inflation has been a major challenge recently and may continue to be a challenge.

Perhaps a 2 percent target, while the goal of most central banks globally, might not be the best goal for the Bank of Japan.

As the Japanese economy has been a relatively stable economy for a very long time, perhaps the idea of focusing on increasing inflation is not the goal. Perhaps the goal should be focusing on increasing demand in the economy, where a larger and larger part of the population is ageing too fast.

Article:

BOJ Gov. Kuroda announced the 2% inflation goal in April 2013 -- shortly after his appointment as the central bank's chief -- as a target to be attained in around two years, and introduced a powerful monetary easing policy of purchasing massive quantities of government bonds to increase money supply in circulation. While the consumer price index hike (excluding fresh produce) rose temporarily to 1.4%, the figure has since been 1% or less for a majority of the time. Following the spread of the coronavirus, negative figures have been recorded for the consumer price index.

During the BOJ's reviews of financial policies carried out in March 2021, it analyzed that "it will take time to shift the views and habits of the public that act based on the assumption that prices won't rise, which has become ingrained due to a long period of deflation. "

In a press conference in March, Gov. Kuroda said, "I'd like to continue persistently with this powerful monetary easing policy, and achieve the 2% target."

Ideas:

An increase in the money supply, in theory, sounds like a good strategy for Japan. The problem with that is, some potential borrowers might take that money instead of using it in the economy, to increase demand, which might increase price, they would take the money as just save it. 

So maybe there need to be a way for banks to ask, and they most likely do, what will be money be used for.

Of course the borrower can always change their mind later.

But the goal of getting the inflation rate to 2 percent has been a strategy now for about 7 or 8 years and it hasn't been achieved yet, despite the negative interest rate strategies.

Again maybe for Japan, because of the dynamics of the aged population, the 2 percent goal is not the right goal for Japan.

Have a nice day and be safe!