IMF Says Bank of Japan Should Stick to Path on Inflation Target

IMF Says Bank of Japan Should Stick to Path on Inflation Target

© Bloomberg. Pedestrians walk past the Bank of Japan (BOJ) headquarters in Tokyo, Japan. Photographer: Akio Kon/Bloomberg© Bloomberg. Pedestrians walk past the Bank of Japan (BOJ) headquarters in Tokyo, Japan. Photographer: Akio Kon/Bloomberg

(Bloomberg) — The Bank of Japan should remain committed to its unprecedented monetary stimulus in order to hit a still-distant price target, according to the International Monetary Fund.

“Communication has to be simple and straightforward,” Odd Per Brekk, deputy director of the Asia-Pacific Department, said in an interview on Thursday. “The message has to be the commitment to reaching the 2 percent inflation target and to put in place the policies needed to get there.”

Governor Haruhiko Kuroda has faced increasing calls to talk about an exit strategy since assuming a new five-year term this month. Critics worry about the sustainability of the BOJ’s policies given the 2 percent inflation target remains distant and the size of its balance sheet is approaching that of the nation’s annual economic output.

“Monetary policy in Japan is very much focused on changing expectations. The main challenge facing the Bank of Japan is to re-anchor inflation expectations at 2 percent,” Brekk said. “From that point of view, communication by the Bank of Japan on the commitment to stay the course is the right one.”

The central bank should de-emphasize the quantitative target further, the IMF official said. The BOJ pledges it plans to increase its bond holdings by an annual pace of roughly 80 trillion yen ($743 billion). SMBC Nikko Securities estimates the pace has been slowing down to around 50 trillion yen.

“Moving fully to the yield curve control framework would help strengthen the message that you can sustain and that you will sustain an accommodative monetary stance,” Brekk said.

Disclaimer:
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. All CFDs (stocks, indexes, futures) and Forex prices are not provided by exchanges but rather by market makers, and so prices may not be accurate and may differ from the actual market price, meaning prices are indicative and not appropriate for trading purposes. Therefore Fusion Media doesn`t bear any responsibility for any trading losses you might incur as a result of using this data.

Fusion Media or anyone involved with Fusion Media will not accept any liability for loss or damage as a result of reliance on the information including data, quotes, charts and buy/sell signals contained within this website. Please be fully informed regarding the risks and costs associated with trading the financial markets, it is one of the riskiest investment forms possible.

0 replies

Leave a Reply

Want to join the discussion?
Feel free to contribute!

Leave a Reply

Your email address will not be published.