IMF: Bank of Japan May Need to Tighten Faster If Inflation Beats Forecasts
The Bank of Japan is "doing the right thing" by normalising monetary policy and may need to raise interest rates faster if inflation rises more than expected, Krishna Srinivasan, director of the IMF's Asia and Pacific Department, told Reuters on October 17. "If inflation rises faster than expected, you have to start tightening faster because you don't want inflation expectations to get un-anchored. It's data dependent," he said.
BOJ Governor Kazuo Ueda, attending the IMF annual meetings in Bangkok, said on Friday the central bank will focus on anchoring underlying inflation around its 2 percent target and won't tolerate any overshoot, stressing its resolve to keep raising rates. The BOJ lifted its policy rate to a 31-year high of 1.25 percent in September, and many analysts expect another increase by year-end.
Srinivasan added that Japan must clarify how it plans to fund its big spending plans and lay out a medium-term fiscal framework to ease market concerns about fiscal risks. A weak yen has added to price pressures by boosting raw material import costs. (GSM, based on Reuters reporting)
Source: GSM · USA (original Chinese edition)
Photo: 东京国会议事堂。The national diet building, tokyo. Photo by Wiiii, Wikimedia Commons, CC BY-SA 3.0.
