Japan’s struggle with deflation has been going on for many years. Recent news, however, is a cause for a bit of relief. Inflation has increased by a small percentage. Nonetheless, the central bank of Japan still has some work to do, as inflation is still below the desired level at 2 percent.

The bank of Japan still has more to do

The country’s core inflation was at 0.8 percent in March compared with a year earlier. This is higher by 0.1 percent than the same figure in February. Recent trade war between the US and China had had a negative impact on Japanese products abroad as it had affected global growth and demand in the overall. The Japanese central bank had implemented negative interest rates to keep the exchange rate encouraging for importers. It has also implemented a stimulus program, but growth remains below ambitions.

The easing program comes at a cost

At this point, it seems that the central bank’s policy is not as effective as desired. It is also coming at a cost. The stimulus program is weighing down on the banking sector, where real profits are diminishing as a result of excessive money supply.

Inflation is not expected to reach target

Analysts are not optimistic for many reasons. First, they believe the central bank has no more cushions to use in the event of an economic slowdown. Second, the oil prices which are not expected to soar in the near future may keep fuel prices low. If it’s to achieve its objectives, the bank of Japan will need to revise its policy and consider different approaches other than its easing program.