Kazuo Momma, ex-Governor of the Bank of Japan (Executive Economist at Mizuho Research & Technologies), said that the monetary policy of the Bank of Japan will not be adjusted during the current inflation period, but after next year, in curbing side effects there will be a relaxation financial is a problem and he said it has high potential. he said in an interview on June 6th.
By this time next year, it will become clear that there will be no prospect of sustainable wage rises, and he expects, “In fact, there will be a growing recognition within the BOJ that the price stability target of 2 %. up.” He pointed to the fact that the issue of monetary policy will shift to “how to curb the side effects of monetary easing,” and analyzed that policy control will be maintained on the assumption that the 2% target will have maintained but not carried out.
In particular, he said it would be “most orthodox” to remove yield curve control (YCC, long-term interest rate control) and negative interest rates, and return to the zero interest rate policy, which causes only short-term interest rates . to be lower. Considering the impact on the market, the policy needs to be changed at a time when “the economy is good, but the upward pressure on interest rates is not so strong.” However, it is said to be a narrow road that can only be reached once.
Momma said he expects the BOJ to wait until next year’s spring labor strike to see wage increases, even as the yen depreciates and puts upward pressure on prices. A wage rise of around 3% is essential to achieve the BOJ’s aim of ensuring a sustainable and stable increase in prices of around 2%, but “there is no basis for making a decision until next year’s spring labor strike.”
As for the guidance for future policy rates, which is based on the impact of the infectious disease, it will not be changed until the end of March next year, when it will be part of the special campaign to support financial support in response to the new coronavirus, which extends it in the September meeting, it will end. I can’t think about it,” he said.
Japan’s consumer price index (core CPI excluding fresh food) is expected to exceed 3% in the near future. “It is not appropriate to curb demand through fiscal austerity or monetary tightening,” he said, showing his understanding of the Bank of Japan’s stance of continuing to ease monetary policy.
Against a background of divergence in the direction of central banks in the United States and Europe, which are rushing to raise interest rates to curb inflation, and the Bank of Japan, the Yen is depreciating rapidly.It has taken steps to intervene in yen buying.
Monma said that the US Federal Reserve Board (FRB) decided to raise interest rates significantly the day before, and if they had not intervened, “we were in a situation where we did not know how far the Yen would depreciate. It was a very good time to intervene.” was evaluated.
However, he suggested that the division of roles between the government and the BOJ in relation to foreign exchange should be reviewed a little more. “As a matter of fact, monetary policy affects the exchange rate. The exchange rate is also an important part of the financial environment, and it is natural that the central bank should take care of it,” he said. Governor Kuroda has repeatedly explained that exchange rate policy is the authority and responsibility of the Ministry of Finance, and that monetary policy will not target the exchange rate.
He said YCC was increasing the depreciation of the Yen by setting long-term interest rates at a low level. The dissemination of information by the YCC and the Bank of Japan has become a message of the depreciation of the Yen.
