Type to search

BOJ Deputy Says Time Not Ripe for Tight Monetary Policy

Masazumi Wakatabe said consumer inflation may accelerate to 1% in coming months and could speed up more than expected as more companies pass on higher costs

Bank of Japan
The Bank of Japan is bucking the global trend of aggressive policy tightening. Photo: Reuters.


It is too soon for the Bank of Japan (BOJ) to tighten monetary policy as the economy has not fully emerged from the pandemic’s hit, deputy governor Masazumi Wakatabe said, dousing speculation that creeping inflation could prompt it to tweak yield targets.

Wakatabe said in a speech on Thursday that consumer inflation may accelerate to around 1% in coming months and could speed up more than expected as more companies seek to pass on higher costs to households.

But the BOJ must maintain its massive stimulus programme as inflation expectations have yet to rise towards the bank’s 2% target, he said.

“It would be premature to tighten monetary policy before inflation hits the BOJ’s target, as doing so could cripple the economy’s recovery,” said Wakatabe, who is considered among the most dovish members of the BOJ’s board.


Inflation May Hit 2% in April

Some analysts expect consumer inflation to approach 2% in April and beyond, when the drag from cellphone fee cuts end and as rising global raw material costs trigger more price hikes.

Wakatabe said it won’t be enough for inflation to briefly touch 2% for the BOJ to withdraw stimulus, adding that inflation must rise long enough to change public perceptions of future price moves and trigger wage hikes.

“It would be appropriate to tighten policy if wages and inflation expectations spiral higher, and trigger a second-round effect that pushes inflation above our target,” Wakatabe said.

“In a country like Japan where medium- and long-term inflation expectations aren’t anchored at 2%, the appropriate policy response would be to maintain easy monetary policy.”

Under yield curve control (YCC), the BOJ pledges to cap the 10-year bond yield around 0% via massive money printing to fire up inflation to its elusive 2% target.

Markets are rife with speculation that BOJ could shift its YCC target target from the current 10-year to the five-year bond yields as inflation creeps up, and prospects of steady US rate hikes push up yields across the globe including those in Japan.


  • Reuters, with additional editing by Jim Pollard




IMF Staff Scrapped Key Coal Language from Japan Statement

Japan Services Contract at Fastest Pace in 5 Months

Japan Eyes Tighter Curbs to Thwart Cyberattacks



Jim Pollard

Jim Pollard is an Australian journalist based in Thailand since 1999. He worked for News Ltd papers in Sydney, Perth, London and Melbourne before travelling through SE Asia in the late 90s. He was a senior editor at The Nation for 17+ years and has a family in Bangkok.


AF China Bond