Japan must keep an eye on how much its massive bond-buying program is disrupting the bond market, but it is right to tackle perpetual crippling deflation, says the Organization of Economic Co-operation and Development’s top regional economist.
“QQE (qualitative and quantitative easing) has been very successful at raising inflation expectations to around two percent…and we have to trade off the risk of qualitative and quantitative easing with allowing deflation to continue,” Randall Jones , the OECD’s Head of Japan & Korea Desk, told CNBC.
After two years of a 80 trillion yen ($671 billion) monetary easing program, the Bank of Japan’s 2 percent inflation target has proven to be elusive. If anything, the country is again flirting with deflation. In February, core consumer prices were flat year-on-year and many economists are forecasting low oil prices will tip Japan’s inflation rate into the negative over the next months.