BOJ Adopts Abe’s 2% Target in Commitment to End Deflation
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The Bank of Japan (8301) set a 2 percent inflation target and said it will shift to Federal Reserve-style open-ended asset purchases in its strongest commitment yet to ending two decades of deflation.
Stocks fell and the yen strengthened after the BOJ and the government said today that the price goal has no deadline. The central bank will buy about 13 trillion yen ($145 billion) in assets per month from January 2014, including about 2 trillion in Japanese government bonds and about 10 trillion yen in treasury bills, the BOJ said in Tokyo.
Investors’ disappointment over the absence of a time limit and the one-year wait for the open-ended purchases highlights concern that new Prime Minister Shinzo Abe may fall short in his campaign to revive the world’s third-largest economy. The BOJ’s independence may come under increasing pressure, with the government likely to demand a “clearer time frame,” said RBS Securities Japan Ltd.
“The market will be disappointed,” said Junko Nishioka, chief economist at RBS and a former BOJ official. “The BOJ wants to emphasize that it requires flexibility for its monetary policy.”
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