Haruhiko Kuroda, the governor of the Bank of Japan, has suggested the central bank’s quantitative and qualitative easing (QQE) programme, which started in 2013 and was extended in October 2014, “has exerted its intended effects”.
In a speech to the Yomiuri International Economic Society in Tokyo, Mr Kuroda stated: “The improvement in economic activity and prices is likely to continue, and the CPI inflation is projected to reach the price stability target of about 2 per cent around the first half of fiscal 2016. The Bank will keep its stance of continuing with QQE, aiming to achieve the price stability of 2 per cent, as long as it is necessary for maintaining that target in a stable manner.”
The governor acknowledged that the fall in oil prices last year had affected the intended inflation path, but argued the effect had been “common to many countries” including the UK, the US and the euro area.
He explained: “In Japan the underlying trend in inflation has improved steadily, and as the effects of the decline in crude oil prices dissipate, the year-on-year rate of increase in the CPI is projected to accelerate toward the price stability target of 2 per cent. We believe this forecast is consistent with the commitment to achieving the price stability target at the earliest possible time, with a time horizon of about two years.”
“That said, if there are changes in the underlying trend in inflation and it is deemed necessary to take action in order to achieve 2 per cent inflation, the Bank will make adjustments as appropriate without hesitation.”
Mr Kuroda noted that QQE combined with the government’s policy measures had “markedly changed people’s negative mindset, which had taken root under deflation”.
He concluded by noting that if Japan’s economy can continue its turnaround and overcome deflation the country “will provide a rare example of a regime shift through macroeconomic policy”.
The Japanese public, however, seem slightly less confidence than the central bank governor as the latest figures from the Consumer Confidence Index for April showed a slight fall to 41.5 from 41.7 in March.
In addition, the index showed a 0.9 point fall in the willingness of consumers to buy durable goods to just 39.7 in April. Meanwhile the percentage of respondents who expect prices to increase in the next year jumped 1.4 percentage points to 89.2 per cent.
