Office for National Statistics
Raising the Inflation Target
Report

Raising the Inflation Target

Lessons from Japan

Taisuke Nakata
Federal Reserve Board, 2020
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8

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  • Analytical
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Recommendation

Japan had experienced tenacious deflation in its economy for more than 10 years as of 2013, when its central bank took bold steps to stimulate the economy and push the inflation rate into positive territory. Economist Taisuke Nakata examines Japan’s record in inflation targeting and the lessons its spotty progress provides. This intelligent analysis, an important contribution to the literature on best practices available to central bankers worldwide, will interest economists, policy officials and financial professionals.

Summary

The Bank of Japan (BOJ) has pursued an explicit inflation target. 

From the early 1990s, central bankers have aimed for temperate inflation regimes by instituting explicit inflation targets to control price pressures. While global bankers have used the benchmarks to tether inflation to the lower end of the spectrum, very few institutions have inverted the approach to raise the inflation rate.

The BOJ began its experiment in increasing inflation in 2012 by announcing a target of 1%, a level that experts believed would maintain stable prices. But over the...

About the Author

Taisuke Nakata is an economist at the Board of Governors of the Federal Reserve System.

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