Report of commission of BOJ reports on target inflation of 2%
2023.01.30 04:55
Report of commission of BOJ reports on target inflation of 2%
By Tiffany Smith
Budrigannews.com – In light of the rising cost of prolonged monetary easing, academics and business leaders urged the Bank of Japan (BOJ) to make its 2% inflation target a long-term goal rather than a target that must be met immediately.
The panel stated that a new policy agreement between the government and the central bank must replace the 2013 agreement to re-define the price target.
The panel also demanded that interest rates rise more in line with economic fundamentals and that Japan’s bond market function normally in the proposal.
Yuri Okina, a member of the panel and one of the candidates for the position of BOJ deputy governor, stated at a news conference that “the way the BOJ conducts monetary policy must be revamped.”
She stated:
“The BOJ can make its monetary policy more flexible by making 2% inflation a long-term goal.”
Investors betting that the BOJ will raise interest rates when Governor Haruhiko Kuroda’s second, five-year term and that of his two deputies end in March have pushed up inflation well above the target of 2% have criticized the BOJ’s ultra-loose policy.
The panel member and former president of MUFG Bank Nobuyuki Hirano stated that the BOJ’s yield control policy is becoming unsustainable due to its dysfunctional bond market and significant yield curve distortions.
Hirano stated at the news conference:
“Given such distortions, we must correct the BOJ’s policy into one that is more flexible.” To continue in this manner would be too risky.”
Kuroda reiterated the significance of maintaining an ultra-loose monetary policy in parliament on Monday.
“The economy of Japan is extremely uncertain.” As a result, supporting the economy and fostering an environment where businesses can raise wages is crucial right now,” he stated.
According to Kuroda, “Japan has yet to foresee inflation stably and sustainably achieve our 2% inflation target, supported by wage hikes.” As a result, we must maintain our ultra-loose monetary policy and our inflation target of 2%.”
The BOJ committed to achieving inflation of 2% “at the earliest date possible” when it signed a policy agreement with the government in 2013 in response to strong political pressure to combat deflation.
Since inflation is higher than the BOJ’s target, critics claim that the current agreement is out of date and prevents the BOJ from gradually ending its massive stimulus program.
Prime Minister Fumio Kishida, who will select the next BOJ governor, has indicated the possibility of revising the policy agreement under Kuroda’s successor in light of recent public complaints about rising inflation.
There were approximately one hundred academics, business leaders, and representatives of labor unions on the panel, some of whom were also members of important government councils.
In October, Kishida gave a speech at one of the meetings of the panel, indicating that its proposals have an impact on the government’s economic policy.
