BOJ's 2% inflation target can be tweaked to 'range', deputy governor candidate says (updated)
11/01/2023 06:41
(Adds details of Shirai's remarks)
By Kantaro Komiya
TOKYO, Jan 11 (Reuters) - The Bank of Japan's (BOJ) 2%
inflation target can be modified into a "range" to sustain
monetary policy flexibility amid possibly higher inflation
compared to pre-COVID times, former board member Sayuri Shirai
said on Wednesday.
Shirai, widely seen as a candidate to become deputy governor
at the central bank this spring, also said there should be a
review of Japan's monetary policy over the past 10 years.
"The 2% inflation has been achieved, while it could have
been due to supply-side (factors), and the structure of
inflation might have changed long-term on coronavirus,
geopolitical risks and aging demographics," Shirai said.
"Given the chance inflation may stay elevated compared
to pre-pandemic, we must be careful about abolishing the 2%
inflation target and I think making it a range is one
possibility."
The BOJ, long preoccupied with reviving price growth to
avert a risk of deflation, has been an outlier among central
banks this year.
It has kept interest rates negative while other central
banks have hiked hard to tame inflation, but it
unexpectedly adjusted its policy band
for bond yields last month, and some speculators are
raising their bets on bigger changes.
The new BOJ leadership after the incumbent governor
Haruhiko Kuroda's term ends in April should conduct a policy
review, Shirai said, as she had the impression the central
bank's communication with markets had become slightly "complex".
"But I don't see a drastic change coming to the (BOJ's)
policy framework, since Japanese economic fundamentals appear to
support low interest rates," she said.
Shirai, currently an economics professor at Keio University,
also said the BOJ's move to tweak its bond yield curve control
last month was a "reasonable decision" aimed at making its
policy sustainable, speaking at a news conference at the Japan
National Press Club.
(Reporting by Kantaro Komiya;
Editing by Chang-Ran Kim and Kim Coghill)
((daniel.leussink@thomsonreuters.com; Twitter:
@danielleussink;))