The Straits Times
Published on Dec 18, 2012

BOJ to mull 2% inflation target as Abe turns up heat


TOKYO (REUTERS) - The Bank of Japan (BOJ) will ease monetary policy this week and consider adopting a 2 per cent inflation target no later than in January, sources say, responding to pressure from next Prime Minister Shinzo Abe for stronger efforts to beat deflation.

Mr Abe's Liberal Democratic Party (LDP) swept to power in Sunday's lower house election after campaigning for big fiscal spending to revive the economy and "unlimited" monetary easing to achieve higher inflation in a country mired in deflation for the past 15 years.

On Monday, he turned up the heat on the BOJ to boost its monetary stimulus when it ends a two-day meeting on Thursday and pressing it to adopt a 2 per cent inflation target, double its current price goal, as soon as next month.

Under pressure, the central bank will likely ease policy this week amid looming risks to Japan's economic outlook, sources familiar with its thinking have told Reuters, and may also start debating how to meet Mr Abe's calls to set a higher price target.