January 9, 2014 / 3:10 AM / in 4 years

UPDATE 1-BOJ's Shirai says possible to take more than 2 yrs to meet inflation goal

* BOJ faces open rift on policy board over inflation target

* Three members worry 2-year time frame unrealistic

* Shirai expresses concern about disinflation in Europe

By Stanley White

TOKYO, Jan 9 (Reuters) - Bank of Japan board member Sayuri Shirai said it may be desirable to take more than two years to achieve the central bank’s inflation target if the burden on households and the corporate sector proves to be excessive, according to the text of a speech released on Thursday.

Shirai also said there is a lot of uncertainty about the time frame for the BOJ’s 2 percent inflation target and that the central bank has yet to anchor inflation expectations around 2 percent, according to the text.

A rift has already emerged among the BOJ board as Shirai and two other members objected to the central bank’s timeframe for its inflation target, reinforcing concerns that it is unrealistic and could complicate monetary policy in the future.

“There could be instances where it may be appropriate to conduct monetary easing aimed at achieving 2 percent at a pace slower than about two years -- provided that the pace of inflation is judged to be creating an excessive burden on households and firms,” Shirai said in the speech text.

If downside risks to the economy and prices emerge, the BOJ should not hesitate to ease policy further, she said, according to the text of a speech delivered on Tuesday in Singapore.

The BOJ aims to achieve its 2 percent price stability target at the earliest possible time, with a time horizon of about two years as a benchmark, to end 15 years of mild deflation.

Doubts about the price target have lingered since the BOJ introduced it about a year ago with a greatly expanded its monetary easing with huge purchases of government debt.

These doubts came to the fore in October when Shirai, a former International Monetary Fund economist, and two other policymakers on the nine-person board dissented against the central bank’s rosy outlook for achieving its 2 percent inflation target.

Turning to overseas economies, Shirai said disinflation is somewhat of a concern in the euro zone, but it is less of a concern in the United States, according to the speech text.

Economists have expressed concern that European countries could fall into deflation after the zone’s economic malaise lead to an unexpected slowdown in inflation.

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