Bank of Japan de­lays in­fla­tion goal again

The Myanmar Times - - International Business -

JAPAN’S cen­tral bank has again pushed back the time­line for hit­ting its in­fla­tion goal, the lat­est pol­icy change that has raised ques­tions about at­tempts to re­vive the de­fla­tion­plagued econ­omy.

The Bank of Japan has for the past three years em­barked on a bond-buy­ing stim­u­lus pro­gram to try to keep in­ter­est rates ul­tra-low and in­crease bor­row­ing and spend­ing.

The scheme was in­tro­duced by BoJ gov­er­nor Haruhiko Kuroda in con­junc­tion with a gov­ern­ment spend­ing drive which Prime Min­is­ter Shinzo Abe hoped would drag the econ­omy out of years of tor­por.

But in a fresh sign that au­thor­i­ties are still strug­gling, the bank said it now ex­pects to hit 2 per­cent in­fla­tion by March 2019 – four years later than its orig­i­nal tar­get and the lat­est in a string of de­lays.

It also leaves the next move up to Mr Kuroda’s suc­ces­sor as the tar­get date is a year af­ter his term ends.

Mr Abe hand-picked Mr Kuroda to help drive his “Abe­nomics” growth blitz of big spend­ing, easy money and struc­tural re­forms, in early 2013.

The pro­gram sharply weak­ened the yen – fat­ten­ing cor­po­rate prof­its – and set off a stock mar­ket rally that spurred hopes for a once-soar­ing econ­omy caught in a spi­ral of fall­ing prices and lack­lus­tre growth. But more than three years later growth re­mains fragile while in­fla­tion is far be­low the BoJ’s tar­get. Data last week showed con­sumer prices fell in Septem­ber for a sev­enth-straight month.

The BoJ hoped that con­sumers would spend more if prices were ris­ing, per­suad­ing firms to ex­pand op­er­a­tions and get­ting the world’s num­ber -three econ­omy hum­ming.

But wage growth has fallen be­low ex­pec­ta­tions, mean­ing work­ers have less money to spend. Mr Abe’s prom­ises to cut through red tape – the key third plank of Abe­nomics – have also been slow in com­ing.

Japan’s cen­tral bank also cut back its con­sumer price fore­cast for the cur­rent fis­cal year end­ing March 2017 and for the sub­se­quent two years.

The move is the lat­est pol­icy tweak. In Septem­ber the bank re­vealed it would switch its fo­cus to 10-year gov­ern­ment bonds and pledged to keep its yield around zero, by buy­ing as few or as many as nec­es­sary.

It said it would also cut back on the num­ber of longer-dated bonds it holds to try to re­duce the price of long-term se­cu­ri­ties. The plan is to in­crease their yield, mark­ing the lat­est ef­fort to per­suade Ja­panese con­sumers that the price of goods and ser­vices will rise in the fu­ture.

But an­a­lysts said the move was an ad­mis­sion of de­feat which high­lights the lim­its of cen­tral bank power.

Af­ter yes­ter­day’s meet­ing the bank said, “Risks to eco­nomic ac­tiv­ity and prices are skewed to the down­side.

“On the price front, the mo­men­tum to­ward achiev­ing the price sta­bil­ity tar­get of 2pc seems to be main­tained, but is some­what weaker than the pre­vi­ous out­look, and thus de­vel­op­ments in prices war­rant care­ful at­ten­tion go­ing for­ward.”

The bank did not al­ter mon­e­tary pol­icy, in­clud­ing its 80 tril­lion yen (US$763 bil­lion) an­nual as­set-pur­chase pro­gram.

It also left un­changed a neg­a­tive in­ter­est rate pol­icy de­signed to spur lend­ing and and re­tail sales were flat in Septem­ber. The econ­omy con­tracted in the last three months of 2015, be­fore bounc­ing back in Jan­uary-March with a 0.5 per­cent rise quar­ter-on­quar­ter and then a 0.2 per­cent ex­pan­sion in April-June. –

Photo: AFP

A Ja­panese man sells fruits at a mar­ket in Tokyo yes­ter­day. Prices have stag­nated in Japan’s tepid econ­omy.

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