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MNI POLICY: BOJ Eyes Inflation Flexibility In Accord Review

(MNI) Tokyo
(MNI) Tokyo

More leeway on the timing of the 2% inflation target won't be accompanied by a sudden shift away from easy policy tools like negative rates.

A review of the joint statement between the Bank of Japan and the government is expected to deliver more monetary policy flexibility but will not lead to an immediate normalisation of policy, with the 2% inflation target and negative short-term policy rate expected to be maintained, MNI understands.

The decade-old joint agreement has come into sharpened focus ahead of the BOJ's new governor starting on April 9, with mounting expectations the wording regarding the timing of the achievement of the 2% inflation target may be revised from "at the earliest possible time" to a medium to longer-term horizon. Japan no longer suffers endemic deflation but the 2% target has yet to be sustainably delivered despite long-term easy policy.

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A review of the joint statement between the Bank of Japan and the government is expected to deliver more monetary policy flexibility but will not lead to an immediate normalisation of policy, with the 2% inflation target and negative short-term policy rate expected to be maintained, MNI understands.

The decade-old joint agreement has come into sharpened focus ahead of the BOJ's new governor starting on April 9, with mounting expectations the wording regarding the timing of the achievement of the 2% inflation target may be revised from "at the earliest possible time" to a medium to longer-term horizon. Japan no longer suffers endemic deflation but the 2% target has yet to be sustainably delivered despite long-term easy policy.

Keep reading...Show less