The Bank of Japan (BOJ) has failed to achieve its two percent inflation target ahead of this month's deadline, but analysts say the fault doesn't lie with policymakers alone.
"The BOJ needs to face up to and adapt to the reality that the two percent inflation target hasn't been achieved," said Totan Research chief economist Izuru Kato over the phone.
In late April 2013, BOJ governor Haruhiko Kuroda pledged that massive quantitative easing would put an end to two decades of deflation, setting an annual inflation target of two percent within two years.
In fact, after rising on the back of a three percentage point consumption tax hike in April 2014 inflation began to trend lower from mid-year. The latest numbers show inflation eased for the seventh straight month in February. Excluding the impact of the tax hike, inflation was unchanged from a year ago – the first time it stopped rising since May 2013.
"Qualitative and quantitative easing has seemingly done little to catalyze inflation in its first two years," said Credit Suisse chief Japan economist Hiromichi Shirakawa in a note on Tuesday.
Heart of the matter
The focus on the BOJ's inflation target has distracted from the Japanese economy's real problems, analysts said.
At 230 percent, Japan has one of the highest government debt-to-GDP ratios in the world. Easing monetary policy alone was never going to help the country start to grapple with reducing its debt load while paying for an ever growing number of pensioners, said Totan's Kato, a leading critic of the BOJ's QE program.