Grinch who stole inflation

2 April 2015 By Andy Mukherjee

It’s two years since the Bank of Japan cranked up yen-printing in a bid to lift annual price rises to 2 pct in “about two years”. But with companies and consumers refusing to spend the stimulus – and oil cheaper – inflation is at zero. The BOJ needs to think beyond bond-buying.

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One of the architects of Japanese Prime Minister Shinzo Abe’s “Abenomics” campaign on April 1 called on the Bank of Japan to take more action to end deflation when it meets on April 30.

”The economy is at a standstill and prices are seen falling ahead. To do nothing isn’t an option for the BOJ,” said Kozo Yamamoto, a lawmaker in the ruling Liberal Democratic Party. “Further monetary easing is absolutely essential to ensure that the Japanese don’t slip back to a deflationary mindset.”

On April 4, 2013 the BOJ set out to achieve 2 percent inflation “at the earliest possible time, with a time horizon of about two years.”

In October 2014, the monetary authority dropped the reference to “about two years” and said it will expand its quantitative easing programme, “aiming to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner.”

According to the BOJ’s current plan, the central bank would boost its holdings of Japanese government bonds by 80 trillion yen ($666 billion) a year, compared with 50 trillion yen earlier.

Japan’s annual core consumer inflation ground to a halt in February, the first time it has stopped rising in nearly two years.

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