BoJ urged to indicate its inflation target clearly

Tokyo: The Bank of Japan should communicate its inflation goal more clearly, Japanese Economy Minister Motohisa Furukawa said as the central bank comes under pressure to halt deflation.

"It's desirable for the BoJ to consider whether there's a better way for the public to understand its inflation policy," Furukawa said on NHK's Sunday Debate programme yesterday.

Opposition party members last month called for Japan's central bank to emulate the Federal Reserve's decision to set a firm inflation target of 2 per cent. Furukawa's remarks indicate the government wants the BoJ to take a more aggressive stance, while trying not to interfere with its independence, said Masamichi Adachi, senior economist at JPMorgan and Chase & Co.

Frustration

"Furukawa's comment is signalling some frustration within the government," he said by phone from Tokyo. "But it doesn't mean that the government wants to risk the central bank's policy by pushing too much."

The central bank avoids setting an explicit inflation target and follows a policy whereby it has a so-called understanding of price stability that it aims for. The current view is for price stability to be a situation where the cost of goods rises between more than zero and as much as 2 per cent, centred at about 1 per cent.