Bank of Japan Board Member Seiji Adachi argued that given the high uncertainty regarding the price outlook, it is too early to change or end ultra-loose monetary policy.
Bank of Japan Board Member Seiji Adachi said it was too early to phase out excessively loose monetary policy due to uncertainty over the price outlook.
Adachi said that while consumer inflation in Japan is accelerating faster than initially expected, risks to the price outlook in the long-term are to the downside due to increasing signs of weakness in the global economy. He said that a recession in the US economy, in particular, would significantly damage the Japanese economy and suppress prices.
“Amid great uncertainty over the price outlook, there are upside and downside risks. But in the longer term, the downside risks seem greater. While considering whether it is appropriate to change monetary policy, such “We have to carefully consider the risks,” he said.
Markets are swarming with speculation that the BOJ will soon change its yield curve control (YCC) policy, which has been criticized for distorting market prices and crushing financial institutions’ profits.
Adachi argued that the distortions in the shape of the yield curve have disappeared and there is no need to change the YCC now.
“We are seeing some changes in the public’s deflationary mindset or perception that prices will not go up. In a sense, we are getting close to reaching our price target. But there is a high level of uncertainty over our core inflation outlook, so it’s early to change monetary policy,” Adachi said.