Sep 21, 12:11 PM EDT

Bank of Japan sets higher inflation goal to revive economy


AP Photo
AP Photo/Eugene Hoshiko

Latest Business News
The U.S. Labor Department is investigating possible abuses of employees by Wells Fargo in connection with the bank allegedly having opened millions of unauthorized accounts in a drive to meet sales goals

Carnival, American Express and Kite Pharma rise in U.S. trading, while Rice Energy and Amgen slip

U.S. stocks are closing higher, with many of the biggest gains coming in technology and consumer stocks

U.S. home prices rose modestly in July, pushed higher by strong gains in Portland, Seattle and Denver, a private index says

The fastest-growing part of the U.S. auto market is getting another new vehicle

Latest News
Bank of Japan sets higher inflation goal to revive economy

Japan's central bank chose to keep its policies for sustaining a stronger economy mostly unchanged at a policy meeting that ended Wednesday

Multimedia
A district summary of the Beige Book
Measuring economic stress by county nationwide
Mall malaise: shoppers browse, but don't buy
Unemployment by the numbers
Family struggles with father's unemployment
Saying an affordable goodbye
Hard times hit small car dealer
Latest Economic News
The Asian Development Bank says the economies of developing countries in Asia are holding up despite stubborn global headwinds, and that earlier forecasts that the countries as a group will grow 5.7 percent in 2016 and 2017 remain unchanged

Turkish financial markets have taken a battering after ratings agency Moody's downgraded the country's credit grade to junk status to account for a series of shocks to the economy that included a string of bombings and an attempted coup

The president of the European Central Bank says that both markets and the economy have been "resilient" in the wake of Britain's vote to leave the European Union

Business leaders in Britain are reacting with unease in the months following Britain's decision to leave the European Union

A closely watched survey shows that business confidence in Germany, Europe's biggest economy, has increased sharply to its highest reading since May 2014 amid signs that concerns related to Britain's vote to leave the European Union have dissipated

Egypt has lifted a ban on even trace amounts of fungus in its wheat imports, after sellers enraged by Cairo's demands boycotted tenders, threatening the supply of the world's largest importer of the grain

Bank of Japan sets higher inflation goal to revive economy

Life has become exceedingly hard in Suriname, where the economy has been in freefall amid the collapse of global commodity prices and the slide of the local currency relative to the U.S. dollar

WHY IT MATTERS: Wall Street matters whether you invest or not _ just look at the crisis of 2008

An Egyptian Cabinet minister says the government is negotiating a $4 billion loan with China

Interactives
Greece's Debt Threatens to Spread
State budget
gaps map
Auto industry problems trickle down, punish Tennessee county
Women give old Derby hats a makeover in tough economy
S.C. town deals with highest unemployment in South
How mortgages were bundled and sold as securities
Tracking the $700 billion financial bailout
Tracking the year's job losses
State-by-state foreclosures since 2007
Credit crisis explained
Presidents and their economic legacies
Lexicon of the financial crisis
Americans' addiction to debt

TOKYO (AP) -- Struggling to rejuvenate an ailing economy, Japan's central bank has set a more ambitious goal for raising inflation and announced steps meant to raise the profitability of financial firms.

World stocks rose Wednesday after the decision by the Bank of Japan, with Japan's benchmark Nikkei 225 index jumping 1.9 percent.

The bank said it would seek to overshoot a 2 percent annual inflation target that it's already failing to meet. By raising the inflation goal, it hopes to convince consumers and businesses that prices are heading up, coaxing them to spend more now and fuel faster economic growth.

Analysts expressed doubt that the new target would change the mindset of Japanese shoppers and businesses long used to a stagnant economy and flat or declining prices.

"No one believes it," said Sung Won Sohn, an economist at California State University Channel Islands. "They can't get close to 2 percent (inflation). So how are they going to exceed 2 percent?"

The Bank of Japan kept short-term rates at negative 0.1 percent and said it will continue its asset purchases at a rate of about 80 trillion yen ($787 billion) a year.

But while keeping short-term rates low, it will aim to push up yields on long-term government bonds. A wider spread between short- and long-term rates would benefit life insurers and other big institutional investors, whose investment returns have slumped since the central bank imposed a negative interest rate policy early this year.

In a 61-page assessment, the Bank of Japan said its "quantitative and qualitative easing," monetary policy had succeeded in ending deflation, or falling prices. But it said that managing "inflation expectations" to encourage consumers and businesses to spend more is taking time.

"Sluggishness is expected to remain in exports and production for some time, and the pace of economic recovery is likely to remain slow," it said.

Analysts expect the central bank to eventually slash its policy rate further.

"With underlying inflation set to fall to zero in coming months, we expect the policy rate to eventually fall to minus 0.4 percent," Marcel Thieliant of Capital Economics said in a commentary.

The world's other major central banks have spent years struggling to rejuvenate their economies, to raise inflation and get businesses and consumers to spend more.

In the United States, the Federal Reserve is expected to raise short-term U.S. interest rates - but probably not before a meeting in December.

In December 2015, the U.S. central bank raised rates for the first time since 2006. It was widely expected to hike rates several more times this year, has held off as the U.S. economy sputtered, hobbled by weak global growth and a strong dollar that makes American goods pricier in foreign markets.

Meanwhile, European Central Bank chief Mario Draghi is asking for help from the governments of the 19 counties that use the euro currency. The ECB on Sept. 8 left its aggressive stimulus measures unchanged. It called on European governments to spend more on infrastructure projects and to enact reforms to make their economies more efficient and business-friendly.

---

AP Economics Writer Paul Wiseman in Washington contributed to this report.

---

Follow Elaine Kurtenbach on Twitter at twitter.com/ekurtenbach

Her work can be found at http://bigstory.ap.org/content/elaine-kurtenbach

© 2016 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed. Learn more about our Privacy Policy and Terms of Use.