Greater Easing Effects May Amplify Economic Swings: BOJ Sakurai

May 25, 2018

Maebashi, Gunma Pref.- Bank of Japan policymaker Makoto Sakurai on Thursday underscored the need to be aware of the risk of greater monetary-easing effects leading to wilder economic fluctuations.

With the BOJ easing policy increasingly stimulating demand, "a prolonged large supply-demand imbalance could unnecessarily amplify economic fluctuations," Sakurai said in a public lecture in Maebashi, Gunma Prefecture.

Sakurai said the current "moderately tight" supply-demand balance should be maintained for "as long as possible."

The central bank should work to achieve its 2 pct inflation target "as soon as possible," but that does not mean blind efforts should be made, he also said.

Sakurai said it was "unavoidable" that the BOJ last month stopped projecting in a quarterly report when inflation would reach 2 pct, because the projection seemed to have uselessly stoked speculation about its policy management.

At a press conference later in the day, Sakurai mentioned a future exit from the current policy, which includes negative interest rates and massive government bond purchases.

"We'll have to consider various things when prices begin to move and easing effects strengthen," he said.

Still, he stated that it is "too early" to review the current policy, claiming that its side effects are "not worrisome at the moment." Jiji Press