TOKYO (Reuters) - The Bank of Japan could halve its 2 percent inflation target as the sharp fall in oil prices drags down the country’s consumer prices even as it benefits the economy overall, a key economic adviser to Prime Minister Shinzo Abe said on Monday.
Koichi Hamada, a professor emeritus of economics at Yale University and a reflationist member of Abe’s brain trust, told Reuters the central bank should rethink its price target given the changing global environment.
It could cut the target to 1 percent and extend the time frame for achieving the target to three years from the current two, he said in an interview.
Hamada’s comments mark a shift for the adviser, who was an architect of “Abenomics”, the policies of massive BOJ easing and government spending after Abe took office in December 2012.
“It was difficult to predict crude oil prices would decline by 50 percent and it is natural for the BOJ to reconsider its inflation target,” Hamada said. “I don’t think the BOJ needs to feel responsible for losing credibility by changing its inflation target.”
Reporting by Kaori Kaneko, Sumio Ito; Editing by Chris Gallagher