TOKYO: Bank of Japan Governor Kazuo Ueda said on Tuesday the central bank will aim to achieve 2% inflation, as measured by the overall consumer price index, on a sustained basis.
In gauging whether inflation will sustainably hit its target, the BOJ focuses on underlying inflation, or the broad trend of price moves that strips away one-off factors such as fuel and volatile fresh food costs.
“When we speak of underyling inflation, we exclude one-off factors from overall CPI moves. But that process at times could be difficult,” Ueda told parliament.
The BOJ introduced a 2% inflation target in 2012, which served as a basis for former governor Haruhiko Kuroda to deploy a massive stimulus programme in 2013.
The central bank exited the stimulus last year and raised short-term interest rates to 0.5% in January on the view Japan was on the cusp of sustainably achieving 2% inflation.
The BOJ has said its long-term goal would be for overall consumer price index (CPI) to stably move around 2%.
But in seeking to do so, it looks at indices that strip away one-off factors to better capture price moves driven by the strength of the economy.
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To that extent, the BOJ produces its inflation forecasts based on core CPI, which excludes fresh food prices, and the so-called “core-core” index that also strips away fuel costs.
The difference between overall and core CPI has become politically sensitive as soaring price of rice, vegetables and fuel boost the rising cost of living for households.
Overall CPI rose 3.6% in December from a year earlier, much faster than a 3.0% gain in core CPI and a 2.4% increase in core-core CPI.
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