Bank of Japan Gov. Haruhiko Kuroda emphasizes the need to reverse people's "deflation mindset" for inflation in Japan to reach the central bank's annual 2 percent target — which he declared would be achieved in two years when the BOJ embarked on his "unprecedented" monetary easing in 2013 as a key component of the Abe administration's bid to bust deflation, but now he concedes may be out of reach during his five-year tenure. However, he does not seem to give an answer on how specifically that mindset can be changed.
If the BOJ's scenario was that consumption will rise and prices go up by spreading inflationary expectations among the public and pumping more money into the economy, things do not appear to have worked as simple as that. The consumer price index, which marked a 1.5 percent year-on-year rise in April 2014, has hovered in the negative territory for the recent seven months in a row to September as household spending remains weak.
In pushing back the 2 percent inflation target once again to "around fiscal 2018" last week, Kuroda said it's not easy to dispel the deflation mindset — which he appears to view as a mentality embedded among consumers and businesses as a result of the deflation that gripped the nation since the 1990s to anticipate prices to fall and, based on that expectation, hesitate to spend or invest more. He acknowledged it was "regrettable" that the target could not be reached in two years, although he lays the blame chiefly on the global slowdowns in emerging economies and the steep fall in crude oil prices.