Another year, another miss: Following a two-day meeting, the Bank of Japan pushed back its inflation target once again. The new target is 2018.
Yet, despite the missed inflation target and despite no further stimulus by the Bank of Japan at the last two meetings, the Yen has weakened.
Bank of Japan Pushes Back Inflation Target Again
Please consider Bank of Japan Trims Inflation Forecasts.
At the end of a two-day meeting, the first since a broad policy revamp in September, the central bank’s board voted to keep its new anchor for 10-Year government bond yields at zero, according to a statement. The BOJ also left its target for a short-term interest rate on some commercial bank deposits at minus 0.1%.
Instead, the bank pushed back its forecast date for hitting 2% inflation to around fiscal 2018. Previously the bank said it would reach its target in fiscal 2017. The Japanese fiscal year ends in March.
The decision to stand pat on policy comes despite the government’s headline inflation measure showing consumer prices have fallen in each month since March. Even the BOJ’s own inflation gauge, which excludes both fresh food and energy, edged up only 0.2% in September, the slowest increase in three years.
The bank’s sidestepping of action demonstrates a change in Mr. Kuroda’s “bazooka” approach. Having failed to deliver 2% inflation in two years—as he boldly promised in April 2013—Mr. Kuroda has now shifted to a slower, more pragmatic approach that partly reflects the inability of central banks across the world to spark price growth as easily as they once thought. Economists say the ball is now in the court of Prime Minister Shinzo Abe’s administration.
BOJ Inflation Target History
2013, 2014, 2015, 2016, 2017, 2018
USD/JPY Weekly
USD/JPY Monthly
On September 5, the Bank of Japan announced “No Limit to Monetary Easing”, but has now failed to deliver increased stimulus twice.
One might have expected the Yen to rally given the newfound patience of the Bank of Japan following six years of missed targets. Instead, the Yen put shows reluctance to strengthen beyond the 100 level.
Is Shinzo Abe prepared to try something spectacular?
Just Do It
I repeat my message to Abe and the Bank of Japan: Please stop talking and do something: Buy it all. Buy everything. Announce a plan to buy every asset in the world.