Bank of Japan Gov. Haruhiko Kuroda said the central bank can help avoid negative price shocks and achieve its 2 percent inflation target by working on infl
ZURICH – Bank of Japan Gov. Haruhiko Kuroda said the central bank can help avoid negative price shocks and achieve its 2 percent inflation target by working on inflation expectations through forward guidance.
“Although there remain issues to be resolved to achieve the price stability target of 2 percent, the environment surrounding prices in Japan has improved steadily compared to five years ago,” Kuroda said in a Monday speech at the University of Zurich’s Swiss Institute of International Studies. “It is not easy to quickly dispel the deflationary mindset that has formed over the course of 15 years of deflation.”
The BOJ remains far from its 2 percent inflation target even after more than 4½ years of massive monetary easing. Kuroda has repeatedly said that the central bank needs to continue with its stimulus, even as other central banks begin taking steps to tighten policy.
Kuroda said Monday that with a steadily improving output gap, companies are likely to gradually raise wages and prices.
“If further price rises come to be widespread, inflation expectations are likely to rise steadily. The bank will continue to persist with powerful monetary easing to ensure that such positive developments are not cut short.”
With the Federal Reserve and the European Central Bank moving toward normalization, the BOJ is diverging further and further from its peers. This may keep the yen weak and contribute to inflationary pressures at home, while leaving it vulnerable to any economic shocks in the coming years.
