“If necessary, the Bank of Japan will launch further accommodative monetary policy measures, for example by reducing interest rates.” This is what Haruhiko Kuroda, president of the BOJ, the central bank of Japan, said.
Kuroda has confirmed the commitment (considered Mission Impossible style for many years now) to reach the inflation target of 2%, showing optimism about the ability of the inflation rate to hit the target, even if not before 2023.
In 2023, the inflation rate will fluctuate to still much lower values, with the consumer price index “equal to 1% or just above 1%”.
Japan has often been talked about with reference to the phenomenon of the liquidity trap.
Kuroda has faced the thorn in the side of the Japanese economy, that of the weakness of private consumption, a plague that has become more painful with the Covid-19 pandemic.
“Japan’s private consumption has remained stagnant,” admitted the governor of the Bank of Japan. In any case, he added, “the economy will improve when the impact of Covid dies down due to vaccinations”.
By controlling the yield curve, the Bank of Japan ensures that short-term interest rates remain negative at -0.1% and that Japanese government bond rates – benchmark for long-term rates – fluctuate around zero.
The Bank of Japan has also often been criticized for ETF purchases, practically for buying part of the Tokyo stock exchange, as has often been said:
“We are not considering stopping buying or transferring or selling” ETFs, Kuroda said a few days ago in an interview with Nikkei Asia.
In July, Japan’s core inflation measured by the core component of the consumer price index fell by 0.2% year on year, reporting a 12th consecutive month of decline. And in the face of the inflation target of 2% of the Bank of Japan.