Judging from the latest economic forecasts, Japan's central bank is falling even farther behind on meeting its 2 percent inflation target. Meanwhile, its efforts to keep interest rates down are bringing the bond market to the verge of a coma. So great is the Bank of Japan's buying to support its quantitative easing, traders may just stop showing up to work.
How to get out of this impasse? Officials must be more creative. One suggestion: Stop trying so hard to hit the inflation target.
As long as the 2 percent goal drives policy, the BOJ must keep muddling through until it's within reach. But the number is elusive: The bank now thinks it won't happen until 2021. This commits it to years of further stimulus, leaving it with scarce resources to combat any new slowdown — related, say, to the worsening U.S.-China trade spat. There's also mounting concern about the financial strains that years of negative interest rates are placing on regional banks. For a guy who likes to frame things in terms of sustainability, BOJ Gov. Haruhiko Kuroda looks to be on an unsustainable course.