The Bank of Japan (BOJ) needs to create expectations that deflation can be beaten and should consider inflation targeting, a senior adviser to the International Monetary Fund said today.
Mr David Robinson, senior adviser at the IMF's research department, said: "The BOJ should set out a clear communications strategy for how it is going to beat deflation," he said, adding that this should include some form of inflation target.
Under inflation targeting, a central bank commits itself to achieving a certain rate of inflation within a certain period. For the BOJ, this could involve buying unconventional assets such as real estate.
Mr Robinson said he sees deflation in Japan as driven mainly by a shortfall in demand. He also said the IMF will hold detailed discussions with the Japanese government on its economic policies later this month.
