The Bank of Japan on Feb. 14 announced that it would adopt a "price stability goal" of 1 percent for the time being — a virtual introduction of an explicit inflation target of 1 percent. The central bank also decided to increase its financial asset purchase program by ¥10 trillion, raising its total to ¥65 trillion, and to keep the key interest rate at a level between zero and 0.1 percent.
The BOJ should be praised for showing its determination to help end the Japanese economy's persistent deflation. It is hoped that the central bank and the government will mobilize their available tools to end the nation's economic stagnation.
Up to now the BOJ had shunned adopting an inflation target. A strong factor behind the BOJ's decision was the U.S. Federal Reserve's decision in late January to adopt a 2 percent inflation target and to extend a zero-interest-rate policy through the end of 2014 instead of mid-2013 as had been previously decided. Following the Fed's decision, a call for the BOJ to adopt a inflation target had grown among the ruling and opposition parties.