Bank of Japan Governor Haruhiko Kuroda admitted for the first time that the Bank of Japan failed to meet the 2% inflation rate target that was set in 2013. ‘’It is true, we did not manage to achieve 2% inflation target in two years,‘’ Kuroda said at Japan’s Keio University.
‘’Inflation expectations observed in practice are highly sticky and change only slowly,’’ said Kuroda acknowledging that it is not easy to change the public’s perception that deflation will persist. If public expects deflation, it is very difficult to achieve inflation simply by introducing QE. Despite the theory we can therefore see that public’s expectation of inflation is what matters the most.
Bank of Japan is aiming to achieve 2% inflation rate which is a usual inflation rate target in developed world. Other central banks are struggling to achieve inflation targets as well. According to inflationdata.com, Europe is teetering on the edge of ‘’Japan-Style’’ deflation. You can read more about recent inflation in EU here.
Kuroda also said that Bank of Japan might consider expanding the range of securities it buys in the future. ‘’We’ve always said we won’t hesitate to take additional easing steps if needed. But we can’t show in advance when we will do so and how,’’ Kuroda stressed that Bank of Japan is not intending to surprise markets with timing.