A recent article published by CNBC discussed the difficulties that Japan is facing in it's economic policy. The country's central bank aims to increase the inflation rate to 2% by fiscal year 2019, but this goal is not very likely due to current trends, according to Hiro Shirawaka, Credit Suisse's chief economist for Japan. Shirawaka stated that this inflation goal is not likely if the yen continues to strengthen. The appreciation of the yen is counter-intuitive to this desired higher inflation rate. Japan's current inflation rate is 0.9% as of January. This is relevant to the course because it shows some of the difficulties that governments face in trying to achieve certain economic goals.
Source: https://www.cnbc.com/2018/03/20/japans-inflation-rate-may-not-be-2-percent-if-yen-strengthens-credit-suisse.html
4 comments:
I think that an interesting point about this article is that one event such as the Olympics in 2020 could help the country reach their goal. I wonder if the increase in government spending in preparation for the games will have any effect in addition to the increase in tourism.
It is odd to why the yen was appreciated if their goal inflation is 2% and if the positive trend continues, it will become very hard to reach the goal.
A stronger yen would make exports more expensive, along with a decrease in foreign investment on assets, thereby reducing capital outflow. I believe appreciating the yen to achieve an inflation rate target of 2% is not the best idea since appreciation of the yen is counter-intuitive to the desired higher inflation rate as mentioned in the article.
Reading through this article I do believe that Japanese yen will continue to strengthen and with the Olympics coming in 2020 there will be an inflation rate from the tourist coming to watch the games in Tokyo.
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