Establishment economic thinking is that the “right” rate of inflation is 2%. Thoughts on this position can be found here: The Goal of 2% Inflation, Rethought — New York Times.
Japan is falling far short of 2% inflation, despite the Bank of Japan buying ¥80 trillion worth of bonds each month. Analysts are now speculating as to when the BoJ will increase stimulus there.
BoJ governor Haruhiko Kuroda has argued that ¥80 trillion a month is enough to boost inflation and growth. However, what Mr. Kuroda says and what he does are sometimes two different things. Only three days before a massive expansion of buying last October, he told Japan’s parliament that “all was well.”
Markets are now speculating about when the BoJ will increase buying. Significant is that Kozo Yamamoto, an MP in the ruling Liberal Democratic party, who was a political godfather of the current Abenomics stimulus, recently called for an increase in the pace of BoJ asset buying. While Yamamoto has no direct influence on the BoJ, he is close to some of the “reflationist” BoJ board members.
The BoJ could act as early as July, but some economists think that a move is more likely in October. Regardless, still more massive money creation for solving the world’s economic ills is the prevalent thinking.
The world’s central banks and governments are determined to get inflation moving to the upside. Presently, they are confident that they can control the rate of inflation. However, when inflation gets going they may find it hard to reign in.
