(Reuters) - Bank of Japan Deputy Governor Kikuo Iwata said it was difficult to achieve 2 percent inflation strictly within the central bank’s self-imposed deadline of two years due to slumping oil prices and a bigger-than-expected hit on spending from last year’s tax hike, the Asahi newspaper reported.
But he stressed that inflation is set to hit 2 percent at or around the fiscal year beginning in April, as real wages rise and the economic recovery spread to smaller firms and regional areas of Japan,
“The impact of last year’s sales tax hike on household spending was bigger and longer than what most experts, including myself, had expected,” Iwata said in the newspaper interview that ran on Wednesday.
Many analysts have expressed doubts that the BOJ would be able hit its inflation goal under its two-year timeframe.
Iwata said there was no need to change the BOJ’s commitment to achieve 2 percent inflation “at the earliest date possible with a timeframe of around two years,” as the pledge itself had the effect of changing inflation expectations.
He also shrugged off concerns raised by some analysts that a future exit from the massive stimulus program may be delayed because the BOJ might pay heed to government calls to keep monetary conditions ultra-loose to support the economy.
“I don’t think the government’s finances will loosen because of the massive monetary easing,” he said.
Reporting by Leika Kihara; Editing by Chris Gallagher & Shri Navaratnam