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“It’s not just about generating inflation …. We will look closely at the entire economy and make a comprehensive assessment.”

Bank of Japan (BOJ) Governor Haruhiko Kuroda emphasized this in a press conference following the Bank’s end-October Monetary Policy Meeting. The statement should be interpreted as the BOJ’s current take on the quantitative and qualitative monetary easing (QQE) program it began two and a half years ago. While a very fair statement, it has significant implications for the “price stability” mandate of the central bank in the economy with the world’s oldest population.

In January 2013, the BOJ introduced inflation targeting, a policy it had previously resisted, aiming for an annual increase in the consumer price index of 2%. In April of that year, Kuroda took office and began an unprecedented experiment in large-scale monetary easing.

How should this policy be assessed today? Although it’s had a major positive impact on financial markets, it is probably fair to say that its effect on the “entire economy” has been rather disappointing. Corporations, helped primarily by the weak yen, have grown their profits and expanded employment, but wages have not increased as expected, despite the government’s desperate appeals – and even intervention.

Sluggish wage growth may be explained by a number of factors, but one that cannot be overlooked is the aging of Japan’s population. Since the start of Abenomics in December 2012, 1.82 million jobs have been added. But more than half the new jobs have been filled by people older than 65 who often work to stay active and supplement inadequate incomes – and, in another metric, the great majority of the new jobs are part time. Make no mistake, it’s a good thing that old folks are rejoining the workforce with jobs (even at low wages) that suit their varied lifestyles. From a macroeconomic perspective, though, this will keep a lid on wage growth.

Even if wages were to increase faster in the future, the aging of the population would thwart the BOJ’s ability to attain its goal of 2% annual growth in the price index. Already, households with only elderly people make up more than 20% of all households in Japan. These families would not benefit from wage growth and would be especially vulnerable to even slight increases in prices: Though social security benefits adjust to inflation to some extent, they would still not cover their spending. The issue is not just economic but also political.

There is absolutely no doubt that Japan needs to escape deflation given the nation’s fiscal situation. But an increasingly important question is: What is a feasible and desirable inflation target, both economically and politically? The question ought to be debated together with the issue of social security reform.

A version of this blog post appeared in Japanese in The Nikkei on 10 November 2015.