- Sayuri Shirai, Bank of Japan board member
The Bank of Japan once being confident in reaching the 2% inflation target within two years amid unprecedented stimulus measures, that are aimed at boosting growth and inflation, is now starting to sound less optimistic amid the upcoming tax hike in April.
One of the BoJ board member's, Sayuir Shirai, expressed her concerns that there is a possibility the central bank will broaden its 2% inflation target into a numerical range as soon as price gains advance closer to the desired level. In case the band is implemented, it will provides more flexibility for Japanese policymakers as they assess the risks and benefits of the quantitative easing. The similar approach is already used by the central bank of Canada. Some of the economists already believe that the BoJ will allow itself a deviation from the goal of achieving 2% inflation in two years. The only difficulty in shifting to this approach is the exiting strategy from the current course, as it will cause a massive sell-off.
Last week a report showed a core measure of inflation soared 1.3% in January, marking eight straight monthly increase. Even so, Shirai warned that it is still to early to start thinking about a band. The BoJ has maintained its inflation outlook, saying core CPI will rise 1.9% in the year ending April 2015, while Barclays Plc see the level reached only in 2017.
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