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Bank of Japan’s Hiroshi Nakaso says economy still needs monetary support, warns of risks

Nakaso said that while the economy was recovering moderately, risks to the outlook were skewed to the downside due to uncertainty over US economic policies and weak price growth at home.

Bank of Japan, BOJ, Hiroshi Nakaso, Nakaso, Japan economy, business news, economy news, latest news, indian express Bank of Japan Deputy Governor Hiroshi Nakaso. (Reuters File Photo)

Bank of Japan Deputy Governor Hiroshi Nakaso said Japan’s economy still needs massive monetary support given overseas uncertainties and stubbornly weak price growth, shrugging off market speculation it may raise its bond yield target this year. Doubts over the BOJ’s resolve to keep Japanese government bond yields from tracking global long-term interest rates drove the 10-year JGB yield to a one-year high last week, forcing the bank to conduct a special bond buying operation.

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The rise in long-term rates challenged the BOJ’s commitment to its “yield curve control” scheme introduced in September, under which it guides the benchmark yield around zero percent in a bid to accelerate inflation to its 2 percent target.

Nakaso said that while the economy was recovering moderately, risks to the outlook were skewed to the downside due to uncertainty over U.S. economic policies and weak price growth at home.

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“Some market players, taking into account recent rises in overseas interest rates, argue that the BOJ might consider raising its long-term rate target,” Nakaso said in a speech to business leaders in Kochi, western Japan, on Thursday.

“But the momentum toward achieving our price target, while sustained, isn’t sufficient. There’s still a long way to go to achieve our inflation target,” he said. “I believe it’s most important that the BOJ persistently pursue powerful monetary easing.”

The BOJ revamped its policy framework in September, shifting its target to interest rates from the pace of money printing after three years of aggressive asset purchases failed to accelerate inflation to its 2 percent target. It has kept policy steady since then.

Core consumer prices in December fell 0.2 percent from a year earlier, marking the 10th straight month of declines and remaining distant from the BOJ’s price goal.

First published on: 09-02-2017 at 09:10:01 am
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