Amid intense debate over the Abe government’s inflation target, some officials at the Bank of Japan think the 2 percent goal will probably remain out of reach for the next three years, according to sources familiar with the matter.
The pessimistic view comes as the BOJ prepares for a quarterly outlook report next month that will provide its first estimates for prices and economic growth in the fiscal year that begins in April 2021.
The central bank hasn’t started discussions on actual numerical forecasts for the report, which will be released at the end of a two-day policy meeting on April 25, according to the sources. They were speaking in recent weeks, in the lead up to the March 14-15 policy gathering, amid signs that inflation will weaken this year.
Six years of aggressive monetary policy under Gov. Haruhiko Kuroda has helped Japan out of deflation but also hurt banks and bond markets. Kuroda on Friday kept stimulus unchanged and reaffirmed his commitment to the price target. Finance Minister Taro Aso earlier in the day suggested things could go wrong if Japan focuses slavishly on 2 percent.
The officials who see the target as unlikely to be met for the next three years judge inflation momentum to be insufficient, according to the sources.
Aso, who signed off on the 2013 joint statement with the BOJ that committed the bank to 2 percent target, said last week that many factors have changed since then. He said “only newspapers and the BOJ” are still adamant about the goal.
Inflation figures for February are due Friday, with the median forecast of economists surveyed by Bloomberg for the core consumer price index, which exclude fresh food, to remain at 0.8 percent.
The BOJ’s most recent outlook report in January projected core inflation to average 0.9 percent in the fiscal year starting this April and 1.4 percent the following year.