2023-08-31 01:21:48
Mana Nakara, a private-sector member of the government’s Economic and Fiscal Advisory Council (chaired by Prime Minister Fumio Kishida), said the Bank of Japan and the government’s joint statement included a revision of the 2% inflation target, including making it more flexible. He expressed his intention to discuss the matter.
In an interview on the 30th, Nakara pointed out that in the new joint statement, “I think it will be necessary to include a statement that the government will operate flexibly without sticking to the price target of 2%.” He said the issue might “be on the table” at the advisory council, including by raising the issue himself. Ms Nakara is Vice Chairman of Global Markets Headquarters at BNP Paribas Securities, and in November 2021 she became the first female private member of the Advisory Council.
If price target is to be achieved, “Cancellation of negative interest rate is one option” – Bank of Japan member Tamura
In July, the Bank of Japan effectively raised the upper limit of yield curve control (YCC) following last December, and there is a deep-rooted view that the market is beginning to normalize monetary policy. The extraordinary monetary easing that was started under the former president Haruhiko Kuroda is approaching a turning point, and there is a possibility that the momentum for reviewing the joint statement that served as the basis for it will increase.
The BOJ and the government issued a joint statement in January 2013, stating that the BOJ aims to “achieve the 2% inflation target as soon as possible” while the government will work on a growth strategy and sustainable fiscal policy. It stipulated that the Council on Economic and Fiscal Policy review its efforts periodically.
Mr. Sora pointed out that if interest rates rise in the process of normalizing monetary policy, it would be the government that would be in trouble, and if interest rates suddenly jumped up, it would be a big deal just to pay interest. Although we must avoid a disorderly rise in long-term interest rates and a simultaneous depreciation of the yen, he said, “It is difficult for the Bank of Japan to control everything on its own.” It is said that the BOJ and the government formulating a new joint statement and reconfirming their cooperation will help maintain the credibility of Japanese government bonds.
No change in Japan’s credit rating for 1-2 years, risk of BOJ normalization
Japan’s government bonds are currently rated “A” by three leading overseas rating companies. With the aging and declining population, the debt continues to expand, delaying the return of the primary balance (primary balance) to surplus for the national and local governments, while the current account surplus is shrinking.
Nakamura said, “When we look at Japan’s future, we can only see the possibility of it being downgraded. pointed out. To that end, he says it is important for the BOJ to increase the degree of freedom in monetary policy management by making the 2% inflation target more flexible, and for the government not to lower the flag of fiscal consolidation.
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