Scott Mather notes that central banks have exhausted their monetary policy ammunition aiming for 2 per cent inflation ("It could be time for central banks to ditch 2% inflation target," Markets Insight, June 19). A Japanese official suggested non-monetary approaches to hit the target. Japan is known for omotenashi, the diligent service that workers offer customers. By going the extra mile, workers produce more per hour and reduce unit labour costs and inflation. The official hinted that Japan may have to abandon omotenashi in order to reach its inflation target. This would be a Pyrrhic victory.
Central banks can influence inflation but not keep it at 2 per cent. By trying to, they lose credibility, cause investors to misprice risks and generate imbalances that could produce another crisis.
June 25, 2019 Financial Times
