Bank of Japan urged internally to abandon vague inflation target, paving the way for rate hikes

According to sources cited by Jinshi, the pressure within the Bank of Japan to abandon a vague definition of inflation target is increasing. Previously, Bank of Japan Governor Haruhiko Kuroda stated that 'potential inflation' (mainly focusing on domestic demand and wage strength) remains below the central bank's 2% target, providing a rationale for a gradual rate hike. Critics argue that while overall inflation and core inflation indicators have exceeded the target for years, the Bank of Japan has relied excessively on a vague indicator to guide monetary policy. Now, even some members of the Bank of Japan's policy board are calling for a change in communication strategy, shifting towards a more hawkish approach, with a focus on overall inflation rates. Senior Bank of Japan observer Naomi Muguruma suggested that the Bank of Japan may gradually remove the concept of 'potential inflation' from its policy communication in preparation for the next possible rate hike as early as October.

Related Articles