What do Japan’s government and central bank really want?

Even if BoJ governor Haruhiko Kuroda steadfastly denies reality ("all factors, all eco-nomic variables show that we are on track and that inflation rate would reach about 2% around the first half of fiscal 2016") at least the inflation data due for publication tomorrow will remind everyone that it does not look as if the inflation target will be reached any time soon. Unless the recent round of yen weakness continues, providing new inflationary mo-mentum. So one should think that with every new big figure USD-JPY appreciates by (this morning it reached 124) Tokyo would put the champagne on ice. But immediately the concerns about the side effects seem to dominate. 


Certainly Finance Minister Taro Aso is warning that "excessive exchange rate volatility" was undesirable. The use of this phrase is a clear signal for the markets: the yen depreciation is too quick for Aso's liking. But why? Of course there are negative side effects. Japanese importers are likely to suffer just as much as consumers with a taste for imported goods, says Commerzbank. But that it what happens, not everyone finds inflation pleasant. If government and central bank were serious about the inflation target they would have to accept these side effects and ignore the grumbling. The fact that they do not fuels doubts about the credibility of the inflation target.