Mixed Signals from BoJ Deputy Nominees

The Japanese government’s nominees for the Bank of Japan’s two deputy governors offered contrasting policy views on Tuesday, as one described a bold path to meet an inflation target and the other often declined to commit to unconventional policy steps.

The differing views could raise questions as to how aggressive the BOJ will be as Prime Minister Shinzo Abe pushes for an overhaul of the central bank’s management to encourage bolder monetary measures to end years of deflation.

Nominee Kikuo Iwata, an academic whose research focuses on inflation targeting, suggested the BOJ should buy longer-dated government bonds to reach its 2 percent inflation target in two years or sooner.

He said the central bank should target bonds with a maturity of five years or longer and was willing for such a mandate to be put into law. The BOJ currently buys bonds of up to three years maturity.

In contrast, Hiroshi Nakaso, a career BOJ official, said “it is hard” to say if the central bank can meet its inflation target in two years and there are limits to what monetary policy can do to end nearly 20 years of deflation.

via Reuters

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Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He has been published by The MarketWatch, Reuters, the Wall Street Journal and The Globe and Mail, and he also appears regularly as a guest commentator on networks including Bloomberg and BNN. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza