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
US Dollar – Japanese Yen Weekly
US Dollar – Japanese Yen 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.
Alternatively, Kuroda might with to try Mish’s Sure Fire Proposal to End Japanese Deflation: Negative
Sales Taxes, 1% Monthly Tax on Gov’t Bonds.
Mike “Mish” Shedlock
