BOJ’s Shirai Sees Record Easing Continuing Past 2015

Bank of Japan Board Member Sayuri Shirai said unprecedented easing could continue beyond next year and downplayed the central bank’s optimism that inflation would reach its target in fiscal 2015.

Shirai said in a speech today that her outlook for the economy and prices assumes that monetary easing “will continue during and beyond 2015 under the current framework” to achieve the price goal. “To judge whether prices are rising 2 percent in a stable manner can only be done in October 2016, after the impact of the sales-tax rises have ended,” she told reporters in Okinawa later.

Today’s comments are the first time a BOJ policy board member has stated a specific minimum timeframe for the bank’s unprecedented easing. Governor Haruhiko Kuroda has said the bank will continue easing as long as is necessary to achieve the target of stable 2 percent inflation.

“Shirai’s outlook is clearly different from the BOJ’s,” Mizuho Securities Co. Chief Market Economist Yasunari Ueno said today. “I find it hard to understand why she doesn’t propose increased easing.”

Inflation is likely to reach 2 percent toward the end of the projection period lasting through March 2017, Shirai said. This is about a year later than the BOJ board’s forecast that it would probably be achieved in fiscal 2015, which ends in March 2016. Shirai said she sees inflation at about 1.5 percent or a little higher in that period.

More Easing

If prices deviated from her outlook, Shirai said she would not deny the possibility for extra easing, if it would bring some benefit.

When asked why she didn’t propose more easing if her outlook for prices was lower than that of the bank’s, Shirai told reporters that “like other central banks, we use flexible inflation targeting. This means that the 2-year timeframe to reach the 2 percent target is not absolute.”

Core consumer prices, the bank’s preferred measure of inflation that excludes fresh food, rose 1.3 percent in March from a year earlier, the fourth straight month at that level. April prices will be announced tomorrow, with the median estimate in a Bloomberg News Survey pointing to a 3.1 percent rise, reflecting a boost from a sales tax increase on April 1.

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