Former BOJ Gov.Pqxs Goal of 2% Inflation in 2 Years Raised Concerns in 2013

Jiji Press

11:51 JST, August 1, 2023

TOKYO (Jiji Press) — A push by then Bank of Japan Gov. Haruhiko Kuroda to achieve 2% inflation in about two years raised concerns within the central bank when the effort started in 2013, according to a transcript of the BOJ’s monetary policy meetings released Monday.

The dovish Kuroda took the helm after Masaaki Shirakawa, who had opposed a proposal by the administration of then Prime Minister Shinzo Abe that the BOJ introduce a 2% inflation target, stepped down as governor of the central bank in March 2013.

Relations between the government and the BOJ shifted from confrontation to cooperation under Kuroda’s governorship. Still, their goal of achieving 2% inflation in a sustainable and stable way has not been met.

At a monetary policy meeting in January 2013, then BOJ Policy Board member Takehiro Sato opposed proposals for introducing a 2% inflation target and issuing a joint statement with the government committing themselves to greater cooperation to achieve the goal.

Sato said at the meeting that the goal is “too high” and that “it is highly uncertain whether it will be met,” according to the transcript.

He told government officials at the meeting that the government should not put the onus on the BOJ to achieve 2% inflation but should be sincerely committed to working together.

Then governor Shirakawa had opposed introducing a 2% inflation goal but eventually reversed course under pressure from the Abe administration, which threatened to change the BOJ law to introduce the target.

He gave priority to maintaining the BOJ’s independence without being confident that the 2% inflation goal would be achieved.

The BOJ should be well aware that “considerable amounts of effort will be needed” to achieve the goal, Shirakawa said at the January 2013 meeting, according to the transcript.

BOJ Policy Board members voted 7-2 to introduce the 2% inflation target at the meeting.

Kuroda, at his first monetary policy meeting as BOJ governor in April 2013, said monetary easing of a different dimension would be needed and that necessary measures would be taken intensively to achieve the inflation goal as early as possible, according to the transcript.