Capital Economics Says BOJ's Goal Is Get Inflation Higher

The transcript discusses the debate over maintaining a 2% inflation target, particularly in Japan, where the Bank of Japan (BoJ) has been vocal about this target. It explores the idea of price level targeting and the challenges Japan faces in achieving its inflation goals. The discussion also touches on potential policy shifts and the global review of inflation targets, with insights from various central bank officials.

Why is the 2% inflation target considered important by central banks?

• It is a universally agreed-upon number.

• It allows for policy easing when needed.

• It is the highest inflation rate possible.

• It is a random choice with no significance.

What is the main idea behind price level targeting?

• To eliminate inflation completely.

• To set a fixed price for all goods.

• To maintain a constant inflation rate.

• To allow inflation to overshoot and undershoot the target.

What challenge does Japan face with its inflation target?

• Reducing interest rates.

• Maintaining a stable economy.

• Undershooting the target.

• Overshooting the target.

What potential policy change is being considered by the BOJ?

• Eliminating the inflation target altogether.

• Implementing a fixed exchange rate.

• Adjusting yield curve control before reaching the 2% target.

• Increasing the inflation target to 3%.

What condition might lead the BOJ to consider withdrawing stimulus?

• Inflation exceeding 3%.

• Inflation reaching at least 1.5%.

• Inflation dropping below 0.5%.

• Inflation remaining constant at 0%.