Japan’s Easing of Stimulus Program is Likely Even Before The Target Rate

The economic growth of Japan is getting better which is expected to reduce its huge stimulus program even before reaching the 2 percent target rate as stated by a former Bank of Japan board member, Koji Ishida.

Considering that Ishida was a commercial bank executive back then, he added that the action of the central bank was “long overdue”, affecting the returns of regional banks because of ultra-low rates.

A very low inflation rate induced the BOJ to keep an ultra-easy policy in the past years in spite of the possible consequences of such policies, as well as its banking system.

In achieving the mandate of the central bank by law, the inflation target is necessary in order to stabilize “sound economic development”, as described by Ishida during Reuters’ interview on Tuesday since exiting the central bank two years ago.

Yet, the BOJ would not keep the present policy rates until the inflation target of 2 percent has been reached. Moreover, he said that the central bank will have a “flexible” monetary policy regardless of achieving the target rate.

With looming concerns on very low policy rates, the BOJ allowed loosening their bond yields to be more agile in meeting the zero percent target. However, it may take some time before considering the rates for long-term not to overwhelm the market speculation but instead, they are aiming for a short-term exit from the loose monetary policy, he said.

The central may not rush in curbing the yield curve as of the moment, but it is also apparent that it is possible when the market becomes steady, he added.