TOKYO, Dec 17 (Reuters) – Japan’s government is set to revise a decades-old joint statement with the Bank of Japan (BOJ) that obliges the central bank to reach its 2% inflation target “as soon as possible,” Kyodo news agency reported. reported on Saturday, citing government sources.
Through the review, Prime Minister Fumio Kishida will aim to make the BOJ’s 2% inflation target a more flexible target for allowances, Kyodo reported.
Kishida will discuss the details of revising the statement with the new BOJ chief, who will replace incumbent Haruhiko Kuroda when his term ends in April, according to Kyodo.
In particular, the new statement could remove the phrase “as soon as possible” or change the language to clarify that the 2% inflation target is a medium- to long-term goal rather than one to be reached quickly, Kyodo said. .
Kyodo said the review could force the BOJ to adjust its ultra-loose policies to address the costs of prolonged easing, such as a sharp fall in the yen that inflates the cost of imports.
Under strong pressure from then-Prime Minister Shinzo Abe to take bolder steps to tackle deflation, the BOJ signed a joint statement with the government in 2013 and committed to achieving its 2% inflation target “as early as possible”.
But the BOJ’s years of heavy money printing under Kuroda failed to lift inflation to its 2% target and forced the central bank to switch to a controversial policy capping 10-year bond yields. 0%.
While inflation has exceeded the BOJ’s 2% target largely due to rising raw material costs, Kuroda stressed the need to maintain ultra-loose policy to sustainably meet the price target.
But the BOJ is shrugging off signs it may consider phasing out Kuroda’s stimulus when he steps down next year if wages rise and core economic risks persist, sources told Reuters.
The prime minister’s office and the BOJ were not immediately available for comment on Kyodo’s report.
Speaking at a parliamentary session on November 28, both Prime Minister Kishida and BOJ Governor Kuroda said they should revise the current joint statement.
Markets are rife with speculation that the BOJ will cut its ultra-loose monetary policy next year under a new central bank chief.
Reporting by Yuka Obayashi, Leika Kihara and Daniel Leisink; Edited by Tom Hogg
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