Japan Expects to Hit 2% Inflation in 5 Years, Aggressive Easing Will Continue

The BOJ thinks Japan may hit its 2% inflation target in 5 years. Kuroda says risks are to the downside.

It may take Japan five more years to reach its 2% inflation target according to BOJ governor Haruhiko Kuroda.

"Sometime within the next five years, we will reach [our] 2 percent inflation target," Governor Haruhiko Kuroda told CNBC's Sara Eisen over the weekend. Once that level is reached, we will start "discussing how to gradually normalize the monetary condition."

Inflation remains low. Japan reported its consumer price index, excluding fresh food and energy, rose half a percent in the 12 months through March.

"In order to reach [our] 2 percent inflation target, I think the Bank of Japan must continue very strong accommodative monetary policy for some time," Kuroda added in his interview with CNBC.

Protectionism, unexpected rapid tightening of monetary policy in some countries, and geopolitical tensions in North Korea and the Middle East pose potential risks, Kuroda said.

It's pretty amazing how Japan has failed to destroy its currency despite decades of trying. Once again, I repeat my foolproof plan to cure low inflation in Japan.

Mish’s Four Pronged Proposal to End Japanese Deflation

  1. Negative Sales Taxes
  2. One Percent Tax, Per Month, on Government Bonds
  3. National Tax Free Lottery
  4. Hav-a-Kid

Why wait another five years?

Here is my follow-up article that brings MMT into the picture: Note to BoJ: Try Something Different or Look Perpetually Foolish.

Mike "Mish" Shedlock

Comments (13)
No. 1-13

This 2% over the next 5-7 years meme is so universally accepted these days, it can't possibly come to pass.


Sooner of later they will flood the system with electronic money, and it will be off to the races.


Inflation comes from rapid wage growth causing demand to grow faster than production. What is the BOJ doing to cause any of that? Wages in Japan, and the rest of the industrialized world, have been stagnant for decades. And the simple fact of the matter is that once people come to realize that they have no hope of jumping the next few rungs on ladder of success and income, they learn to settle in happily to their existing station. Once settled in, they're not going on any spending sprees.


Wage changes lag inflation, rather than causing it. When costs rise, employees demand higher pay. When costs rise, employers raise prices, and pass the price increase on to employees with a raise. In the absence of inflation, raises are going to be more rare. With severe deflation, it's the reverse, and employers are going to need to cut wages to respond to having to cut their prices.
Note that the raises which were mandated by increasing the minimum wage in the last decade did not cause inflation. Instead they caused diminished employment opportunities for those at the bottom of the wage ladder, which slowed the economy, and prevented inflation.