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The Bank of Japan (BoJ) said Friday that Japan’s inflation had reached its 2% price stability target, more than 13 years after the central bank adopted the goal as part of efforts to end prolonged deflation and revive economic growth.
Japan had struggled for decades with persistent declines in prices, which policymakers viewed as a major obstacle to sustainable economic expansion. The BoJ introduced the 2% inflation target in 2013 alongside an aggressive monetary easing programme aimed at overcoming deflation.
Although core consumer inflation had exceeded the 2% threshold at various points in the early 2020s, Friday marked the first time the central bank confirmed that the underlying long-term inflation trend had reached a level broadly consistent with its target.
The BoJ said that underlying consumer price inflation is now generally consistent with the 2% price stability target and is expected to remain around that level.
Alongside the assessment of inflation, the BoJ decided to maintain its key interest rate at 1.25%, following an 8–1 majority vote.
The decision came shortly after the US Federal Reserve and the European Central Bank also kept their respective policy rates unchanged earlier in the week.
However, expectations are growing that the BoJ could raise interest rates as early as December as inflationary pressures continue to build.
Japan’s core inflation rate rose to 2.1% in September, up significantly from 1.7% in August, according to government data released last week.
The latest assessment represents a significant milestone for Japan’s monetary policy after more than a decade of efforts to establish stable inflation and move the economy away from its prolonged deflationary environment.
