The Bank of Japan assessed that underlying inflation had reached 2%, prompting an internal assessment that the exit from deflation was complete. Meanwhile, the government remained cautious about making an official declaration, and renewed attention focused on the difference in policy stances between the government and the central bank.
On the 30th of last month, the Bank of Japan assessed that underlying inflation, excluding temporary factors, had reached 2%. Nikkei quoted a senior Bank of Japan official as saying, “The cure for deflation is complete,” describing this as the first attainment in 13 years since the 2% target was introduced in 2013.
At a press conference, Governor Ueda Kazuo (上田 和夫) described reaching 2% inflation as “one milestone,” said it would be important to stabilize inflation at around 2% going forward, and indicated a policy of continuing to raise the policy rate.
The government expressed caution about declaring an end to deflation on the same day, saying that it would be necessary to monitor carefully whether positive conditions would continue, taking into account factors such as the output gap.
Experts pointed to consistency with fiscal policy and noted that a declaration of an end to deflation could affect the consistency of demand-stimulus measures such as a consumption tax cut and cash assistance. The tensions among the government, the Bank of Japan and the Ministry of Finance have become apparent, including over personnel issues involving the Bank of Japan and the Ministry of Finance.
Nikkei reported that market participants’ expectations for an additional rate hike in December were increasing, according to its survey.