MNI BRIEF: BOJ Kuroda: Services Must Rise To Hit 2% Price Aim

Bank of Japan Governor Haruhiko Kuroda said on Monday that prices for services will need to consistently make a roughly 2% contribution to the CPI to achieve the 2% price target and goods prices will need to fluctuate around 2%.

“On this point, comparing the distribution of price changes of items that make up the CPI in Japan and the United States, the distribution in the United States before the pandemic shows some variation at around 2%, primarily for services,” Kuroda told business leaders in Tokyo, (See MNI INSIGHT: Weak Corporate Spend A BOJ Virtuous Cycle Concern).

“In Japan, meanwhile, price changes for an overwhelmingly large number of items hover at around zero percent, and there has been no major change to this during the pandemic,” adding that despite large-scale monetary easing for nearly a decade the ‘zero percent anchoring’ of inflation expectations -- in other words, ‘zero-inflation norm’ -- has been extremely persistent.