Japanese Economics Minister Akira Amari warned that it would be premature for the Bank of Japan to consider an exit strategy from its massive stimulus program, voicing hope instead for further monetary easing if achievement of its inflation goal falls behind schedule.
Amari also said that while Japan appears to be emerging from years of persistent price declines, it was too early to formally declare a sustained end to deflation with the economic recovery still vulnerable to external shocks.
The central bank has kept policy unchanged since deploying an intense burst of monetary stimulus in April last year, when it pledged to double base money via aggressive asset purchases to accelerate inflation to 2% in roughly two years.
With Japan only halfway to meeting that target, the BOJ is set to keep its stimulus plan intact well into next year, in contrast to its U.S. and British counterparts, which are starting to telegraph plans for interest rate hikes.
But BOJ officials have become more comfortable speaking about the chance of a future exit from quantitative easing (QE). They have also shown no intention of expanding stimulus any time soon on their conviction that Japan is making steady progress in meeting the price goal.
Amari said Japan was no longer suffering from price declines, with inflation steadily accelerating. But he warned against complacency, saying he wanted more evidence that the economic recovery is strong enough to push up prices sustainably.
Core consumer inflation hit 1.4% in the year to May, excluding the effect of an April 1 sales tax hike. The BOJ expects inflation to slow to near 1% in coming months as the boost from a weak yen fades, before accelerating toward 2% through early next year.
Many private economists still expect the BOJ's next move to be an expansion of, not an exit from, stimulus, as they doubt the price goal can be met within the bank's target timeframe.
With BOJ Governor Haruhiko Kuroda repeatedly voicing confidence of meeting the price goal, however, most analysts expect the bank to hold off on further easing at least until October.
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