Breaking News
Get Actionable Insights with InvestingPro+: Start 7 Day FREE Trial Register here
Investing Pro 0
Ad-Free Version. Upgrade your Investing.com experience. Save up to 40% More details

IMF Advises BOJ to Keep Stimulus Rolling Amid Global Tightening

EconomyJan 28, 2022 06:22
Saved. See Saved Items.
This article has already been saved in your Saved Items
 
© Reuters.

(Bloomberg) -- The Bank of Japan should keep its inflation-targeting stimulus rolling and consider shortening the maturity of its yield target to make its easing framework more sustainable, the International Monetary Fund said Friday, in comments that contrast with global moves to tighten policy. 

Given that Japan’s underlying inflation momentum remains weak at around 0.5% and is not currently projected to reach the BOJ’s 2% target, the central bank needs to keep its policy stance accommodative, said Ranil Salgado, Japan mission chief for IMF. 

In its latest Article IV report published earlier Friday, the IMF also said that if inflation remains weak, the BOJ’s first option should be to cut its policy rate. 

The fund’s recommendations that the BOJ keep pressing ahead with stimulus to spur inflation highlights Japan’s different circumstances as global central banks including the Federal Reserve and the Bank of England pivot toward tightening policy to stem accelerating price growth.

Inflation remains much weaker in Japan than its global peers as seen in Tokyo price data released earlier Friday. Core consumer prices in the capital edged up just 0.2% in January, an indication that national inflation will also slow for now.

Still, inflation is expected to jump in spring when sharply lower phone charges stop dragging on the consumer price index, fueling talk that the central bank might look to adjust policy later in the year. 

The uneven nature of price moves in Japan also means that sharp price increases in energy and daily necessities are squeezing household budgets and companies’ profitability, making inflation a potentially uncomfortable issue for Prime Minister Fumio Kishida ahead of elections in the summer.

BOJ Governor Haruhiko Kuroda tried hard to cool the recent policy normalization speculation last week after the bank stood pat on policy while recognizing that price risks were no longer tilted downward. 

The fund mentioned the possible shortening of the maturity of the BOJ’s yield target as a move that could make the bank’s yield curve control more sustainable, rather than as a move on the path toward policy normalization. The fund has also recommended the targeting of a shorter maturity in previous reports.

The bank currently sets a target of around 0% for the yield on 10-year Japanese government bonds.

In other recommendations, the IMF also said the central bank could increase a portion of bank reserves subject to the negative interest rate to strengthen its effect as a policy tool. 

©2022 Bloomberg L.P.

IMF Advises BOJ to Keep Stimulus Rolling Amid Global Tightening
 

Related Articles

Add a Comment

Comment Guidelines

We encourage you to use comments to engage with users, share your perspective and ask questions of authors and each other. However, in order to maintain the high level of discourse we’ve all come to value and expect, please keep the following criteria in mind: 

  • Enrich the conversation
  • Stay focused and on track. Only post material that’s relevant to the topic being discussed.
  • Be respectful. Even negative opinions can be framed positively and diplomatically.
  •  Use standard writing style. Include punctuation and upper and lower cases.
  • NOTE: Spam and/or promotional messages and links within a comment will be removed
  • Avoid profanity, slander or personal attacks directed at an author or another user.
  • Don’t Monopolize the Conversation. We appreciate passion and conviction, but we also believe strongly in giving everyone a chance to air their thoughts. Therefore, in addition to civil interaction, we expect commenters to offer their opinions succinctly and thoughtfully, but not so repeatedly that others are annoyed or offended. If we receive complaints about individuals who take over a thread or forum, we reserve the right to ban them from the site, without recourse.
  • Only English comments will be allowed.

Perpetrators of spam or abuse will be deleted from the site and prohibited from future registration at Investing.com’s discretion.

Write your thoughts here
 
Are you sure you want to delete this chart?
 
Post
Post also to:
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Thanks for your comment. Please note that all comments are pending until approved by our moderators. It may therefore take some time before it appears on our website.
 
Are you sure you want to delete this chart?
 
Post
 
Replace the attached chart with a new chart ?
1000
Your ability to comment is currently suspended due to negative user reports. Your status will be reviewed by our moderators.
Please wait a minute before you try to comment again.
Add Chart to Comment
Confirm Block

Are you sure you want to block %USER_NAME%?

By doing so, you and %USER_NAME% will not be able to see any of each other's Investing.com's posts.

%USER_NAME% was successfully added to your Block List

Since you’ve just unblocked this person, you must wait 48 hours before renewing the block.

Report this comment

I feel that this comment is:

Comment flagged

Thank You!

Your report has been sent to our moderators for review
Continue with Google
or
Sign up with Email