Japan's economics minister sees flexibility in BOJ's 2 percent inflation target

TOKYO - Japan's economics minister said on Tuesday consumer prices do not have to rise by exactly 2 percent before the central bank can declare its inflation target a success or the government can officially call an end to deflation.

Akira Amari, speaking to reporters, said the government needed to look not just at consumer prices but also the gross domestic product deflator and how closely the economy was performing to its potential.

If consumer prices were rising more than 1.5 percent then that could be considered close enough to the Bank of Japan's 2 percent inflation target, Amari also said.

Some economists worry the BOJ is going to face increasing difficulty in meeting its price target. Amari's comments suggest the government is willing to be more lenient with the BOJ and this could reduce expectations for further easing.

"If consumer prices were rising more than 1.5 percent then I don't think you could complain when talking about the price target," Amari said.

Earlier on Tuesday the government released economic forecasts showing it expects consumer prices to rise 1.2 percent in fiscal 2016/17.

The BOJ has pledged to guide consumer prices to 2 percent some time around the second half of fiscal 2016/17, but government forecasts suggest this is unlikely.

The BOJ is likely to lower its consumer price forecasts when it holds a policy meeting next month due to an extended sell-off in oil and other commodities.

Lower consumer price forecasts alone would not be enough to trigger more monetary easing from the BOJ, sources previously told Reuters.

Expectations for additional easing have also receded slightly after the BOJ last week extended the duration of government debt it buys for its quantitative easing programme. -Reuters