One of the Bank of Japan’s leading advocates for unwinding monetary stimulus indicated the central bank might attain its long sought-after goal of reaching 2% inflation on a stable basis by early next year.
“The achievement is finally and clearly within sight after a decade of large-scale monetary easing aimed at attaining it,” Naoki Tamura, the board member, said in a speech to local business leaders in Kushiro, Hokkaido Wednesday.
Tamura said he hopes to have “a higher resolution of the picture around January to March next year,” with more momentum toward salary gains coming in the next round of spring wage talks, hinting that officials might be able to confirm at that time they’ve hit the goal needed to usher in policy change.
It remains to be seen whether Tamura’s view can win consensus on the nine-member board. BOJ Governor Kazuo Ueda said on Saturday there’s a ways to go on meeting the sustainable 2% target. “We think underlying inflation is still a bit below our target of 2%,” Ueda said during a panel discussion at the Federal Reserve symposium in Jackson Hole.
Inflation, as measured by consumer prices excluding fresh food, slowed to 3.1% in July and is expected to cool further in coming months. The BOJ said last month it expects 2.5% core price growth this fiscal year.
Earlier this week, a leading Japanese expert on price trends accused the BOJ of skewing its inflation forecast too low in order to quell speculation over policy normalization. “You’re going to deviate hugely from the right course of action if you try to justify policy with projections that aren’t true,” Tsutomu Watanabe, an economics professor at the University of Tokyo, said in an interview.
Tamura, a former senior executive of Sumitomo Mitsui Financial Group, surprised BOJ watchers late last year by calling for a policy review. He has also emphasized in February the need to watch for side effects from the yield curve control program.
Tamura was speaking in public for the first time after the BOJ tweaked YCC on July 28 in Ueda’s first surprise move. The bank now essentially allows 10-year bond yields to rise toward 1%, a step that it says isn’t intended to be seen as a move toward normalization.
Most BOJ watchers don’t expect any policy change this year. Economists see April as the most likely month for a policy change, according to the latest Bloomberg survey.
The BOJ concludes its next policy meeting on Sept. 22.
