Deputy Governor Says BOJ Should Brainstorm Ideas For Lower Rates

On Thursday, Masayoshi Amamiya, the deputy governor of the Bank of Japan, said that they should always be thinking about keeping their monetary policy ultra-loose, even if they have to lift it up in some time.

Monetary policy

The deputy governor asserted that since the Japanese economy has not yet recovered from the pandemic and increasing fuel costs are driving inflation, the BOJ should continue with its massive stimulus for some time.

Considered one of the leading candidates to become the next governor of the BOJ, Amamiya said that the central bank was always working on coming up with communications and tools that can be used when they have to end the ultra-loose monetary policy.

Speaking at a news conference, he said that how different tools are used and the order of their use will depend on the strength of the economy as well as inflation.

Therefore, he said that it was not possible to outline the details of an exit from the ultra-loose monetary policy ahead of time.

However, he said that the Bank of Japan should always be thinking about how they can exit such a policy.

Change in members

These remarks come after the two new members of the Bank of Japan’s board also talked about the easy policy of the central bank.

Naoki Tamura and Hajime Takata both said on Monday that an exit strategy should be in place by the Bank of Japan for putting an end to the monetary stimulus.

The term of the existing Governor of the BOJ, Haruhiko Kuroda will come to an end in the coming April. One of the top contenders to replace him is Amamiya, who was behind a number of monetary easing measures.

As for the term of Amamiya and Masazumi Wakatabe, another deputy governor, they will also expire in March.

The change in leadership, along with the addition of Tamura and Takata to the BOJ board that comprises of nine members, could see a shift in the bank’s monetary policy.

No change for now

But, Amamiya asserted that they should continue with an ultra-loose monetary policy for now because there is uncertainty about whether there will be enough rise in the wages to compensate for the increasing cost of living for households.

Even though there is a recovery in household spending, it is essential for wages to rise faster than inflation for consumption to continue increasing.

Amamiya said that there was still uncertainty about the wages outlook and the economic recovery is also weak for now.

Central banks all over the world are tightening their monetary policies in order to battle the surging inflation.

On Wednesday, the US Federal Reserve announced another hike of 75 basis points in the interest rate, after having done the same in the previous month.

There was a 2.2% increase in the core consumer price index (CPI) in Japan that including costs of energy, but excludes food costs.

This saw it go past the 2% target of the central bank for three months in a row.

Leave a Comment