Is there anything interesting to say about today’s predictable and expected Bank of Japan decision to do nothing?
Errr, I draw your attention to footnote two of the statement.
The year-on-year rate of change in the CPI will fluctuate substantially for a year following the introduction of subsidy for high school tuition and other policy measures in fiscal 2010. In assessing the trend of price developments, it is deemed appropriate to exclude such one-off factors that will disappear in 12 months.
That is new. The cuts to high-school tuition have taken effect and may make deflation look worse by as much as 0.5 percentage points in the figures for April, which will be reported in May.
The BoJ intends to ignore the one-off change, as central banks do when they are irrelevant to underlying inflationary pressures in the economy, but I wonder if Japan’s media and politicians will be so obliging. Japan’s CPI (excluding fresh food) fell by 1.2 per cent on a year earlier in February while the BoJ’s ‘understanding of price stability’ is prices rising at 1 per cent per year.
The Bank may find that people would be more willing to ignore temporary distortions to the inflation data were it not 2.2 percentage points off its target after more than a decade of on-and-off deflation.
