The Bank of Japan has indicated that it is shifting its focus from emphasizing attainment of a 2% inflation rate to maintaining inflation at around 2%. Meanwhile, the government is cautious about the impact of declaring an end to deflation on fiscal management, making it a challenge to ensure alignment with the Bank of Japan’s view on prices.
As the Bank of Japan’s policy target of a 2% inflation rate draws closer, it plans to focus going forward on stability at around 2% and appears prepared to raise interest rates while avoiding an acceleration in inflation. The government, by contrast, is cautious about declaring an end to deflation, which could constrain fiscal management, making how to align the Bank of Japan and the government a key focus.
At a press conference in Bangkok, Thailand, on the 16th, Governor Kazuo Ueda (植田 和男) of the Bank of Japan repeatedly said that “the underlying inflation rate is quite close to 2%,” signaling an effort to establish a shared view on prices. Following the press conference, attention has focused on future discussions aimed at aligning their views on prices.
The government and the Bank of Japan are being called on to strengthen coordination to bridge the gap in their views on prices. While continuing to raise interest rates, the Bank of Japan is reaffirming its policy stance of avoiding excessive acceleration and prioritizing price stability.
Attention will focus on developments concerning future guidance and specific ways to align their positions, taking domestic and international financial markets and fiscal management into account. Depending on the level of coordination between the Bank of Japan and the government, the outlook for prices and the operation of monetary policy could change.