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Bank of Japan 2% Inflation Goal Is Unrealistic, Gross Says

• Susanne Walker via

Pacific Investment Management Co.’s Bill Gross said the Bank of Japan’s goal to reach a 2 percent inflation target in two years using its record bond-buying program may be “unrealistic.”

“Much more depreciation of the yen has to take place to get anywhere to 2 percent,” Newport Beach, California-based Gross said in a Bloomberg Television interview with Sara Eisen and Adam Johnson. “I’m not sure other Group of Seven countries are willing to permit that.”

The BOJ plans to purchase 7.5 trillion yen ($77.8 billion) of bonds a month and double the monetary base, which includes cash in circulation, in two years, the central bank said in Tokyo today. That exceeded economists’ median estimate of 5.2 trillion yen a month and is the biggest move since quantitative easing began in 2001. It’s an initiative to end two decades of economic stagnation and 15 years of deflation.

The yen tumbled 3.5 percent to 96.29 per dollar in New York, recording the biggest one-day drop since Oct. 31, 2011.

Relative Value

Gross, whose company is the manager of the world’s biggest bond fund, also said Japan’s purchase program may force investors into other higher-yielding securities outside of the country, including U.S. Treasuries.

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