"There is no doubt that the 2 per cent target is too high"
- Yuichi Kodama, Tokyo-based chief economist at Meiji Yasuda Life Insurance Co.
Consumer prices in the world's third largest economy dipped for the seventh time in eight months, underscoring the risk that the central bank may struggle to reach its new 2% inflation target. Core consumer prices, which exclude fresh food prices, fell by 0.2% in December from a year earlier, after a 0.1% slump in the preceding month. Friday's data are adding to concerns that the inflation target announced this week will be difficult without more easing, as further depreciation of the Yen is widely expected. Earlier this week, the Bank of Japan doubled its inflation target, as new Prime Minister Shinzo Abe was constantly adding more pressure on the bank for bold actions in order to stimulate growth.
"There is no doubt that the 2 percent target is too high," said Yuichi Kodama, Tokyo-based chief economist at Meiji Yasuda Life Insurance Co. "The BOJ will have to implement much looser measures."
"If we change policy to buy more and more bonds to mechanically achieve 2 percent inflation, people might think we are financing government spending," Bank of Japan (BOJ) Governor Masaaki Shirakawa told reporters on Friday. "Long-term interest rates would rise, and the effects of monetary easing would be lost."
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