BoJ faces big rift over 2-year inflation target
BANK of Japan (BoJ) governor Haruhiko Kuroda faced the biggest rift since embarking on his aggressive stimulus campaign in April, with three members of the board dissenting against the bank's rosy outlook for achieving its two per cent inflation target.
In a twice-yearly outlook report released yesterday, the BoJ revised up its economic growth forecast for next fiscal year and projected that Japan will make steady progress towards meeting the bank's two per cent inflation goal in two years.
But two of the nine board members - Takahide Kiuchi and Takehiro Sato - repeated their dissent, made in April, against the two-year timeframe for achieving the price target, nodding to wide-held market views that Japan will need much longer to see prices rise to two per cent.
Another board member, former International Monetary Fund economist Sayuri Shirai, joined the dissenters in calling for more emphasis on downside risks to the economic outlook, underscoring a rift between those optimistic about the outlook and others who were more cautious.
While the disagreement may not immediately lead to a change in the BoJ's current policy framework, pessimists may be more keen to expand monetary stimulus if the economy faces trouble, some analysts say.
"I do not think disagreement will spread because growth and inflation will likely hold up for the next six months," said Hiroshi Shiraishi, senior economist at BNP Paribas Securities.
"But it will become clear from the second half of next year that consumer prices are undershooting expectations. Shirai could be one of the first to call for more easing."
Kuroda put up a brave face, stressing that despite some challenges from slowing emerging Asian growth, Japan's economy will continue recovering and make steady progress towards achieving two per cent inflation in two years. Reuters