Japan advisers urge income and productivity gains beyond BOJ inflation goal

Japan's private-sector economic advisers urged policymakers on November 11 to prioritize lasting gains in real incomes and productivity, arguing that reaching the Bank of Japan's 2% inflation target was not sufficient to secure an enduring escape from deflation.

The four outside experts submitted their recommendations to the Council on Economic and Fiscal Policy after the BOJ said in October it had achieved its inflation goal following nearly 14 years of effort. The prime minister chairs the council, whose members include the finance minister and BOJ governor.

The advisers acknowledged progress in moving away from entrenched deflation but said consumer spending was still weak. Gains in inflation-adjusted incomes and expectations for longer-term growth had not yet been fully realized, they said.

They also urged flexible policy responses and monitoring of risks involving energy costs, financial markets and AI-related investment. Close coordination between the government and BOJ was important for stable prices and durable growth, they said.

Prime Minister Sanae Takaichi said growth should deliver benefits people can feel through better incomes and productivity. She said the government would maintain cooperation with the BOJ under their existing joint accord, while each carried out its own responsibilities.

The BOJ has indicated that further interest-rate increases are needed to contain upside inflation risks. September's core consumer price index increased 2.1% from a year earlier, putting it above the target after nine months.

The government has withheld a formal declaration that deflation is over, seeking stronger evidence that persistent price declines will not return.