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Achieving the Bank of Japan’s Inflation Target
Author:
Mr. Gee Hee Hong null

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Rahul Anand
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Yaroslav Hul null

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Series:
IMF Working Papers
Volume/Issue:
Volume 2019: Issue 229
Language:
English
Publication Date:
01 Nov 2019
DOI:
https://doi.org/10.5089/9781513518350.001
ISBN:
9781513518350
ISSN:
1018-5941
Pages:
37
Keywords:
WP; Inflation targeting; forecasting; fan charts; zero lower bound; FPAS; inflation expectation; output gap; one percent core inflation cost-push shock; BoJ staff baseline; headline CPI inflation; inflation projection; Inflation; Central bank policy rate; Output gap; Interest rate floor
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IMF Working Papers describe research in progress by the author(s) and are published to elicit comments and to encourage debate. The views expressed in IMF Working Papers are those of the author(s) and do not necessarily represent the views of the IMF, its Executive Board, or IMF management.
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The Bank of Japan has introduced various unconventional monetary policy tools since the launch of Abenomics in 2013, to achieve the price stability target of 2 percent inflation. In this paper, a forward-looking open-economy general equilibrium model with endogenously determined policy credibility and an effective lower bound is developed for forecasting and policy analysis (FPAS) for Japan. In the model’s baseline scenario, the likelihood of the Bank of Japan reaching its 2 percent inflation target over the medium term is below 40 percent, assuming the absence of other policy reactions aside from monetary policy. The likelihood of achieving the inflation target is even lower under alternative risk scenarios. A positive shock to central bank credibility increases this likelihood, and would require less accommodative macroeconomic policies.
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Cover IMF Working Papers
IMF Working Papers
ISSN:
1018-5941
Publisher:
International Monetary Fund