Bank of Japan Refrains From Deepening Stimulus

Every year, top global financial policymakers gather in Jackson Hole, Wyoming for a summit. Bank of Japan (BOJ) Governor Haruhiko Kuroda was there, and delivered a disappointing message to those who were waiting for a ramp-up of the bank’s money printing. Although he allowed for future re-evaluation, he said he believed that Japan was on target to reach its 2 percent inflation goal by 2015, and finally break out of its long ‘deflation trap.’
Kuroda Disappoints At Jackson Hole

Some outside analysts don’t agree. By its own admission, the BOJ sees inflation tracking down to 1 percent by December of this year. Morgan Stanley researchers point out that to reach the inflation target, Japan’s core CPI would have to hit 2 percent by April 2015 and stay there through year-end.
[See Related: Detlev Schlichter – Euthanasia of the Japanese Rentier] Reporters at Jackson Hole peppered Mr. Kuroda with questions about possible additional efforts beyond the BOJ’s bond purchases – such as price-level targeting (which would involve a deliberate inflation overshoot to compensate for previous inflation that was below target) or nominal GDP targeting (which would push easing until a nominal GDP target was reached). He demurred, saying that the current program was enough and would stay in place, although he wouldn’t rule anything out for the future.
Abenomics Hits a Wall Japan has never recovered from its early 1990s economic and financial market bust, languishing in sub-par growth for over two decades. In 2012, Japanese Prime Minister Shinzo Abe took office promising ‘three arrows’ to hit the target of economic revival.

This post was published at FinancialSense on 08/28/2014.

 

Leave a Reply

Your email address will not be published. Required fields are marked *