By Leika Kihara
TOKYO (Reuters) – Former Bank of Japan (BOJ) Governor Masaaki Shirakawa has called on policymakers to reconsider central bank monetary frameworks based on inflation targets as they The limit is evident from the recent price spikes in many countries.
In an op-ed published by Shirakawa, central banks in many advanced economies were “overwhelmingly” focused on low inflation before the recent inflation spike and failed to pass the judgment that inflation was only temporary The International Monetary Fund (IMF) released a report on Wednesday to curb the rapid rise in prices.
By allowing inflation to run above target, central banks “forget about the difficulty of taking away the money bowl” and fail to tighten policy quickly enough, he said.
“Inflation targeting itself was an innovation in response to severe stagflation in the 1980 years and early s. There’s no reason to believe it’s set in stone,” Shirakawa said.
We have relied on and updated our monetary policy framework over the past 30 years,” he added. Forward guidance on interest rates.
“Forward guidance on persistently low interest rates can suddenly become too expansionary and inflationary when the economy is hit by an unexpected shock to demand or supply. That may partly explain what we’re seeing now,” he said. Pulling Japan out of decades of deflation and economic stagnation.
His successor and current governor, Kuroko Haruhiko Tian deployed a “bazooka” stimulus program in 30 that boosted growth for several years but failed to push inflation above the BOJ’s 2% target and left the bank short of Ammunition. Many speculate the central bank will phase out its massive stimulus when incoming Governor Kazuo Ueda succeeds Haruhiko Kuroda in April.
on Monday At his parliamentary confirmation hearing in Japan, Ueda said he had ideas on how the central bank could unwind its massive stimulus program, but stressed that it would only shift to tightening if trend inflation picks up significantly in Japan.
Ueda a also said he saw no immediate need to revise the BoJ’s 2% inflation target.