BoJ’s Kuroda: Long way to go before reaching inflation target
Key quotes from the speech by BoJ Governor Kuroda titled "Quantitative and Qualitative Monetary Easing and Economic Theory" at the University of Zurich in Switzerland.
Long way to go before reaching inflation target.
Economic theory points to two possible causes of the prolonged deflation. The first is a decline in the natural rate of interest, while the second is a decline in inflation expectations.
During the deflationary phase in Japan, both the natural rate of interest and inflation expectations seem to have declined.
In order to overcome deflation, real interest rates need to be well below the natural rate of interest, whose key determinant is the potential growth rate.
Going forward, with the output gap improving steadily, firms' stance is likely to gradually shift toward raising wages and prices.
If further price rises come to be widespread, inflation expectations are likely to rise steadily.
The Bank will continue to persist with powerful monetary easing to ensure that such positive developments are not cut short.
Author
Eren Sengezer
FXStreet
As an economist at heart, Eren Sengezer specializes in the assessment of the short-term and long-term impacts of macroeconomic data, central bank policies and political developments on financial assets.
