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BOJ's Kiuchi warns Japan won't hit inflation goal for another 2-1/2 yrs

Hiroshi Nakaso, deputy governor of the Bank of Japan (BOJ), attends the the International Monetary Fund (IMF) conference in Jakarta, Indonesia, on Wednesday, Sept. 2, 2015.

[AOMORI] Japan is unlikely to see inflation hit the central bank's two per cent target over the next 2-1/2 years as consumer spending remains weak and China's slowdown hurts exports, Bank of Japan board member Takahide Kiuchi said on Thursday.

The former market economist also warned that Asian economies may see growth slow significantly as China suffers from huge slack and US consumer spending remains soft, keeping any rebound in Japan's economy modest.

But Mr Kiuchi, among those in the nine-member board wary of the rising costs of the BOJ's radical stimulus, stuck to his lone proposal to taper the bank's asset purchases and allow itself more time to hit its two per cent price target. "Consumer inflation ... is unlikely to reach two per cent even in fiscal 2017" ending in March 2018, Mr Kiuchi told business leaders in Aomori, northern Japan. "I think the price target of two per cent is well above the level consistent with Japan's current growth potential," he said, adding that it was difficult to hit the price target unless the BOJ's monetary efforts were accompanied by structural reforms to boost the country's productivity.

Japan's economy is in a lull and will rebound only modestly ahead given sluggish exports to Asia, Mr Kiuchi said.

Private consumption will also lack momentum as households, hit by rising grocery costs and tame wage gains, curb spending, he said.

The world's third-biggest economy slipped into a contraction in April-June and inflation has ground to a halt, keeping the BOJ under pressure to expand stimulus to meet its pledge to accelerate inflation to two per cent by around September next year.

BOJ Governor Haruhiko Kuroda has voiced confidence that Japan is on track to hit the price target. But some board members, including Mr Kiuchi, share doubts held by private analysts on whether the ambitious target can be met so soon and with monetary stimulus alone.

Mr Kiuchi has been the lone board member to advocate tapering the BOJ's massive asset purchases on concern the cost of the programme, such as drying up bond market liquidity, was already exceeding the benefits.