The Bank of Japan should steer clear of further monetary easing as long as inflation expectations are on the rise, even though its 2 percent price goal is unlikely to be met in two years, a senior International Monetary Fund official said on Friday.
Japan should not rely excessively on monetary easing to stimulate its economy as it could cause an economic bubble and a spike in long-term interest rates, Deputy Managing Director Naoyuki Shinohara told Reuters in an interview.
“I respect the (BOJ’s) 2 percent inflation goal but there’s no reason to insist that it (the timeframe) must be two years,” Shinohara said. “As long as inflation expectations steadily rise, there’s no need to add to the current quantitative easing.”
The BOJ launched aggressive monetary stimulus last April, pledging to boost purchases of government debt and riskier assets under quantitative easing to end 15 years of deflation and meet 2 percent inflation in roughly two years.
Few investors believe the inflation target will be met in the given timeframe, while many are expecting that the BOJ could be forced to ease policy further in case if it fails to fulfill its commitment.
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