Bank of Japan Board Member Shirai Casts Doubt on 2% Inflation Target

Bank of Japan board member Sayuri Shirai emphasized the need for the central bank to pay greater attention to potential downside risks to both growth and inflation. She noted that the target of achieving 2% annual inflation by 2015 may not be attainable.

Shirai expressed concern that inflation expectations remain significantly below the 2% target, and there is uncertainty regarding whether these expectations will elevate to the target level during the projection period.

The Japanese government, in collaboration with the central bank, is striving to combat deflation over the next two years. This involves increasing fiscal spending to complement the aggressive asset purchasing strategy initiated by the Bank of Japan in April, which has led to a weaker yen and boosted profits for numerous export-driven companies.

While the Bank of Japan has indicated that the economy is on a moderate recovery path, Shirai warned that wage growth, which is essential for driving inflation higher, may not occur. Additionally, she highlighted the challenges facing consumer spending as well as headwinds from the global economy.