By Leika Kihara
WASHINGTON (Reuters) – The Bank of Japan may have room to adjust its bond yield target this year, a senior International Monetary Fund official said on Saturday. This is expected to be a sign that wage dynamics in the country may be changing.
What needs to be watched is whether small companies follow suit and raise wages, and whether companies continue to increase wages next year and beyond, he added.
“Our view is that barring a global shock … even next year’s shunto talks should be pretty good,” Salgado told Reuters in an interview on Saturday .
Salgado said the Bank of Japan must keep monetary policy ultra-loose because a sustainable 2% inflation target is not in sight.
Once the BOJ is confident that inflation and wage growth in Japan will continue to accelerate, he said, it could adjust its long-term interest rate target.
Under its yield curve control (YCC) policy, the BoJ guides short-term interest rates at -0.1% and 1-year bond yields are around Zero, with an implied cap of 0.5%.
The Bank of Japan can maintain monetary policy as long as short-term interest rates remain at zero or slightly negative Even if the yield target is adjusted, policy remains accommodative, Salgado said. The annual rate of return target for this year. “We’ve pretty much suggested (the Bank of Japan) consider this.”
Markets are broad It is speculated that the Bank of Japan will adjust the YCC this year under its new governor, Kazuo Ueda. It fell back below the 2% target as import prices started to fall.
