The Wall Street Journal with a great headline!
And the article makes great points
- The BOJ has just admitted, in effect, that it has a credibility problem
- The confession is subtle, but it's very much there. In a neat chart in appendix three of the BOJ's "comprehensive assessment" of how its policy of the past three years has worked, is a calculation of "adaptive inflation expectations." Put simply, long-run inflation expectations depend in large part on where inflation has been, not on the 2% target the BOJ sets for it to be in future.
- This matters because inflation expectations are themselves a major determinant of where inflation ends up.
(bolding mine ... and I posted on the why inflation expectations matter a little while ago ... wish I could find the link!)
