Inflation Target and Anchor of Inflation Forecasts in Japan
Shin-ichi Fukuda () and
Additional contact information
Naoto Soma: Faculty of Economics, The University of Tokyo
No CIRJE-F-1108, CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo
In literature, a number of studies argued that an explicit inflation targeting regime provides less uncertainty about future inflation rates through anchoring expectations. However, it is far from clear whether the argument still holds true when the central bank faces a serious difficulty in achieving the target. The Bank of Japan (BOJ) is a central bank that has adopted an explicit inflation target but faced a serious difficulty in achieving it. The purpose of this paper is to explore whether the explicit inflation targeting regime could anchor inflation expectations in Japan. In the analysis, we estimate panel Phillips curves by using Japanese forecaster-level data of â€œESP Forecastâ€ . We find significant structural changes in how to form inflation expectations. Before the BOJ announced the 2% inflation target, the estimated anchor of inflation expectations was negative. The new target increased the estimated anchor to significant positive values. This suggests that the BOJâ€™s explicit inflation target could partly anchor inflation expectations. However, the estimated anchor has never reached the target. More importantly it started to decline when it turned out that the 2% target would not be feasible in the short-run. This implies that an explicit inflation targeting needs to be a feasible one to anchor inflation expectations persistently.
Pages: 45 pages
New Economics Papers: this item is included in nep-cba, nep-mac and nep-mon
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (3) Track citations by RSS feed
Downloads: (external link)
Journal Article: Inflation target and anchor of inflation forecasts in Japan (2019)
This item may be available elsewhere in EconPapers: Search for items with the same title.
Export reference: BibTeX
RIS (EndNote, ProCite, RefMan)
Persistent link: https://EconPapers.repec.org/RePEc:tky:fseres:2019cf1108
Access Statistics for this paper
More papers in CIRJE F-Series from CIRJE, Faculty of Economics, University of Tokyo Contact information at EDIRC.
Bibliographic data for series maintained by CIRJE administrative office ().