MNI BRIEF: BOJ's Wakatabe Warns On Inflation Target Ambiguity

Bank of Japan Deputy Governor Masazumi Wakatabe said on Thursday that ambiguity in inflation targeting would make the objective of monetary policy vague and could undermine the transparency of monetary policy and its effectiveness.

“This applies to dealing with not only deflation but also inflation,” Wakatabe told business leaders in Shizuoka City. “It will still take time to achieve the price stability target in a sustainable and stable manner.”

Wakatabe cited three factors that he is focused on in assessing the underlying trend of prices; whether high prices spread to services, a further strengthening of firms’ price-setting behaviour, and the strength of firms’ wage-setting stance.

Wakatabe said the outlook for inflation would depend on “whether changes in firms' price- and wage-setting behavior will take hold and people's medium- to long-term inflation expectations will be anchored at 2%.”

“While making use of anecdotal information from firms in addition to a wide range of statistics, the Bank will assess appropriately the outcome of the annual labor-management wage negotiations this spring and how firms' price-setting strategies will develop in reflection of their experience of raising prices during the current phase,” he said.