QuickTake Q&A: Bank of Japan’s Quest for 2 Percent Inflation

The U.S. Federal Reserve, the Bank of England and the European Central Bank are among the world’s monetary authorities that have set an inflation target right around 2 percent. Nowhere, though, does the quest for this special number carry drama like it does in Japan, where Bank of Japan Governor Haruhiko Kuroda has vowed to do whatever it takes to stimulate prices. On Friday in Tokyo, the BOJ indicated there were risks to achieving this target anytime soon.

The BOJ set its current inflation target in January 2013, less than a month after Prime Minister Shinzo Abe came to power with a plan to pull the economy out of two decades of stagnation. In Japan and many other developed economies, prices rising by 2 percent a year is seen as optimal for encouraging companies to invest and consumers to spend. It’s also thought to be low enough to avoid sparking the runaway inflation that crippled Germany’s Weimar Republic in the 1920s and Zimbabwe in more recent times.