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QuestionWhat is the Bank's thinking on price stability and the price stability target?

Answer

Price stability is one of the objectives of the Bank's monetary policy.  The principle, based on which the Bank conducts monetary policy, the definition of price stability, and the Bank's thinking behind price stability, are as follows.

  1. (1) The Bank conducts monetary policy based on the principle that the policy shall be aimed at achieving price stability, thereby contributing to the sound development of the national economy.
  2. (2) In light of this principle, price stability is defined as "a state where various economic agents including households and firms may make decisions regarding such economic activity as consumption and investment without being concerned about the fluctuations in the price levels of goods and services in general."
  3. (3) Price stability that enables economic decision-making smoothly and is consistent with sustainable economic growth must be one on a sustainable basis.
  4. (4) The basic indicator for the evaluation of price developments is a price index that both comprehensively covers goods and services consumed by households and is one to which the general public is accustomed.  To this end, the consumer price index (CPI, all items) is important in light of its favorable attributes, including timeliness.

Based on this recognition, the Bank introduced the price stability target of 2 percent in terms of the year-on-year rate of change in the CPI at the Monetary Policy Meeting held in January 2013.

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