By Makiko Yamazaki
TOKYO, Nov 11 (Reuters) – Private-sector members of the Japanese government’s top economic panel said on Wednesday that hitting the central bank’s 2% inflation target is not an end in itself, stressing that higher incomes and productivity were needed for a lasting exit from deflation.
The submission to the Council on Economic and Fiscal Policy, which is chaired by the prime minister and includes the finance minister and Bank of Japan governor, comes after the central bank last month declared victory in its nearly 14-year battle to achieve its inflation target.
The four external experts on the council said that while there has been steady progress away from long-entrenched deflation, private consumption remains weak and improvements in real incomes and long-term growth expectations have yet to be fully realised.
“What matters is not treating inflation itself as the end goal, but achieving a growth-driven economy with sustained increases in real incomes and productivity,” they said.
The members also cited risks including energy prices, financial market conditions and trends in AI-related investment, urging policymakers to monitor developments and respond flexibly to maintain a stable macroeconomic environment.
Prime Minister Sanae Takaichi struck a similar note in her closing remarks, saying the ultimate goal was to ensure people feel the benefits of economic growth through higher incomes and productivity.
“Based on the existing joint accord, the government will continue to work closely with the BOJ, with each side fulfilling its respective role, to achieve price stability and sustainable economic growth,” she added.
The BOJ has flagged the need to continue raising interest rates to guard against upside price risks and prevent underlying inflation from overshooting its 2% target.
The core consumer price index rose an annual 2.1% in September, exceeding the BOJ target for the first time in nine months.
The government has stopped short of officially declaring victory over deflation, saying it needs clearer evidence that the economy will not slide back into a period of persistent price declines.
“It’s important for the government and the BOJ to closely coordinate and share views on economic and price conditions to secure price stability and sustainable economic growth,” the private-sector members said in their submission.
(Reporting by Makiko Yamazaki; Editing by John Mair and Andrew Heavens)
