BoJ Confident on Inflation Rise and Eventual End of QE

Bank of Japan board member Takehiro Sato said on Thursday the central bank can be flexible on the timing of an eventual exit from its monetary easing, a sign that simply reaching its 2 percent price stability goal will not trigger immediate action.

Sato also said he is confident that consumer prices can continue to rise as improvements in the output gap have a lagging impact on prices.

The central banker also stressed that the BOJ’s economic forecasts anticipate volatile swings in demand caused by a scheduled increase in the sales tax, suggesting he sees little need to adjust policy in the short term.

“If the BOJ can judge that 2 percent will be sustainably achieved, it is possible to exit our policy before inflation actually reaches that level,” Sato said after giving a speech to financial professionals.

“The BOJ can also continue quantitative easing after 2 percent inflation is reached if it judges that the gains are not sustainable.”

The BOJ last week maintained its pledge of increasing base money, its key monetary policy gauge, at an annual pace of 60-70 trillion yen ($589 billion-$687 billion).

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