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BOJ looks set to back 2% inflation

21 Jan

BOJ policy scenariosBank’s apparent readiness to adopt Abe’s target seen as compromising its independence

The Bank of Japan is expected to modify its monetary easing campaign this week with a 2 percent inflation target after being driven into a political corner by Prime Minister Shinzo Abe, who has put priority on beating chronic deflation.

But it remains to be seen whether the BOJ can act aggressively enough to satisfy the new Abe administration because the central bank apparently has few conventional policy weapons left in its arsenal and little hope of accomplishing the feat with monetary policy alone in any stable way.

If the independent BOJ loosens its monetary grip at the two-day meeting starting Monday, it would be the first time in more than nine years it has done so in two consecutive policy meetings, signaling a drastic approach. Continue reading

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