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Tuesday, 22nd January 2013
In Business In Japan,

Prime Minister Abe calls BOJ 2% inflation target 'epoch making'

Following pressure from newly appointed Prime Minister Shinzo Abe to act to boost economic growth, the Bank of Japan (BOJ) has announced that it will double its inflation target.

The new goal, set at two per cent, is an attempt by the BOJ to counteract the country's flagging economy and bring Japan out of recession.

While the bank stopped short of publishing an exact date, it said it would implement the measures "as soon as possible".

The bank had previously set a one per cent price stability target in February 2012.

Prime Minister Abe hailed the changes as "epoch-making … in terms of boldly revising the country's monetary policies".

He suggested that pressure from the government had been instrumental in the changes being brought forward.

"We made it clear that there will be a regime change in macroeconomic policymaking," he said.

Brian Redican, senior economist at investment bank Macquarie, suggested that the changes were needed and couldn't have come soon enough.

"This is very good news," he said. "For once the BOJ has been more aggressive than the market expected. The government is clearly forcing the pace of change, which is no bad thing."

Mr Redican said that for years, the BOJ has suggested that it would tackle the issue of inflation, although to date it had done little to address the problem.

"These changes are more credible," he said.

The stock markets have responded to the news by the BOJ to increase its inflation target as the Hong Kong Hang Seng moved up 0.12 per cent to 23,618.97.

Not all markets advanced however, as the Nikkei fell by 0.35 per cent to 10,709.93 and the Chinese Shanghai Composite went down by 0.65 per cent.

In addition to the news about the rise in inflation, the BOJ said that it would be attempting to ease monetary policy by bringing in open-ended asset purchases from 2014.