TOKYO (Reuters) - Prime Minister Shinzo Abe said it was acceptable for the Bank of Japan to miss its self-imposed deadline for to meet its inflation target, suggesting that the government was in no mood now to pressure the central bank to expand monetary stimulus.
Consumer inflation has ground to a halt mainly due to the effect of slumping oil prices, keeping the BOJ under pressure to do more to meet its pledge - made in April 2013 - to accelerate inflation to 2 percent in roughly two years.
Abe expressed confidence that Japan’s economy remained on a solid recovery path adding that with oil prices continuing to fall, the BOJ missing the two-year deadline could not be helped.
“Oil price falls are positive for Japan’s economy. We accept the BOJ’s explanation that hitting its price target (within two years) has effectively become difficult,” he told parliament.
Abe also said the government won’t meddle in specific monetary policy decisions as he had “full trust” in BOJ Governor Haruhiko Kuroda’s handling of policy.
The BOJ has effectively pushed back its original two-year deadline and now projects inflation to hit its 2 percent target by around September next year - a forecast many analysts still believe is too ambitious, given renewed declines in oil costs.
Kuroda has said he won’t hesitate to offer further stimulus if achievement of the target becomes difficult. But some aides close to Abe have signalled that additional easing was unwelcome as it could spur further yen falls that push up import costs and raise the cost of living for households.
Reporting by Leika Kihara; Additional reporting by Stanley White; Editing by Chang-Ran Kim and Eric Meijer