On the face of it, consumer inflation in Japan finally hit 2%, an elusive goal set by the Bank of Japan. Households know firsthand prices are actually rising, a situation that may have been unimaginable years ago.
But the BOJ is unconvinced — and unsatisfied — because the latest bout of inflation, driven by higher energy and commodity prices largely blamed on the war in Ukraine, is not something policymakers had hoped for. The daunting task awaits the BOJ of making inflation sustainable and acceptable to a public long rooted in deflationary mindsets.
That, along with Japan's slow economic recovery from the COVID-19 fallout, boosts the likelihood of no near-term change to the BOJ's ultra-low rate policy.