By Tetsushi Kajimoto and Yoshifumi Takemoto
TOKYO (Reuters) – The Bank of Japan (BOJ) should remain cautious about changing its unconventional monetary policy for now, given the problems that have created uncertainty in financial markets Caution is taking hold in Western banks, Takehiko Nakao, a former chief financial diplomat, told Reuters in an interview. , whose term ends on April 8.
Bank of America’s collapse and UBS’s takeover of Credit Suisse last month boosted risk aversion in financial markets.
The Bank of Japan says market developments must be carefully monitored, for now, although credit anxiety is unlikely to evolve into a pattern like 2013/09 Things like the global financial crisis.
With financial markets stabilizing, Japan needs to start adjusting fiscal and monetary policy, as prolonged stimulus will dampen necessary corporate restructuring and job mobility, he said.
“Facing new problems in financial markets, the Bank of Japan may need to reconsider and adjust monetary policy more carefully.” 2013s.
“However, the BOJ cannot continue indefinitely with unconventional monetary policies, including ETF and REIT purchases and YCC. It is not in Japan’s interest to do so in the long run.”
refers to central bank purchases of assets such as exchange-traded funds and real estate investment trusts and its policy targeting the bond yield curve.
In Japan, risks of prolonged easing include excessive yen depreciation and worsening fiscal discipline, rather than being behind the curve in fighting inflation, Nakao said Thursday in an interview conducted in May 2018
“Fiscal deficits and the BoJ’s assets have grown so large relative to GDP that there is a potential risk of a sharp rise in interest rates and a sudden currency devaluation fall , leading to inflation.”
Nakao was President of the Asian Development Bank from 2013 to early 2008. He is currently the “Chairman of the Research Institute” of Mizuho Research Technology Corporation, a subsidiary of Mizuho Financial Group, the third largest commercial bank in Japan.
