Japan needs bolder monetary and fiscal stimulus to seize “a once-in-a-lifetime opportunity” from global inflationary pressures to end its war on deflation, according to a Bank of Japan board member who recently left the central bank.
The BoJ has come under market pressure in recent months to reassess its ultra-easy monetary policy as central banks globally race to raise interest rates to tame increasing food and commodity prices. With Japanese interest rates still at minus 0.1 per cent, a divergence in global yields earlier this year sent the yen to a 24-year low against the US dollar.
But Goushi Kataoka, an aggressive reflationist who left the BoJ board last month and was appointed PwC Consulting’s chief economist in Japan, warned that any attempt to weaken the central bank’s efforts to hit and sustain its 2 per cent inflation target would have serious consequences for Asia’s largest advanced economy.