Japan’s inflation lags economy’s robust revival

Many in BoJ agree on need to maintain stimulus, December minutes show

Japan’s inflation in December continued to lag a strong economic revival, leaving the central bank in a dilemma on how to turn off crisis-era stimulus policies that even some of its own board members warn will start to hurt more than help if retained for too long.

Adding to the complication over the Bank of Japan’s exittimeline is a recent rise in the yen, which would make it even harder to vanquish deflation that has beset the world’s third-biggest economy for decades.

Government data released yesterday gave little hope on the inflation front, with core prices last month rising 0.9 per cent year-on-year, unchanged from November. That was well off the BoJ’s 2 per cent price goal and argued for its ultra-easy stance to stay in place for now even as other central banks start to wind back.

All the same, some BoJ board members are already starting to get nervous about keeping policy loose for a prolonged period.