As I mentioned earlier, in January of this year the Bank established a target of 2 percent to achieve price stability. I would like to explain here why this course was decided on. In essence, Japan’s economy had been quite depressed and gradually eroding for some time.
Given this background the reason for setting the 2 percent target, in my view, is the belief that deflation is more harmful to an economy than inflation, and that it is important to achieve a comparable level of (mild) inflation to that of major advanced economies. 1 The Bank’s aim of achieving the 2 percent price stability target is particularly challenging.