Deputy BOJ chief candidate calls for fresh easing, if necessary

March 6, 2018

Tokyo- Masazumi Wakatabe, professor at Waseda University and a government nominee for Bank of Japan deputy governor, suggested Monday that the central bank go ahead with fresh easing if it is necessary to get the country fully out of deflation.

"If it becomes difficult to achieve the 2 percent inflation target with the current monetary policy measures, there will be no other way than to consider implementing further easing steps," Wakatabe said at a confirmation hearing held by the House of Representatives Rules and Administration Committee.

He also said it is "unthinkable" that the BOJ will adopt a strategy for exiting the present "quantitative and qualitative" easing programs before the target is met, stressing that the bank needs to avoid the risk of the economy slipping back into full-blown deflation due to any premature policy shift.

Wakatabe ruled out the likelihood of early monetary policy normalization, after BOJ Governor Haruhiko Kuroda, named by the government to serve another five-year term, said during his Lower House confirmation hearing on Friday that the inflation rate in Japan will reach levels around 2 pct in fiscal 2019 or so and the bank will surely be discussing around that time how to exit the massive monetary stimulus policy coupled with a negative interest rate, which has caused some "side effects" such as deterioration in earnings at commercial banks.

To pull the country fully out of deflation, Wakatabe pointed to a need for cooperation between the government and the BOJ, indicating the possibility of reviewing the existing policy coordination accord between them.

While advocating the current policy, BOJ Executive Director Masayoshi Amamiya, another government pick as deputy chief of the bank, said at Monday'shearing that a wide range of issues needs to be discussed, including evaluations on the positive and negative effects of the unprecedentedly massive easing measures and a future exit strategy.

"I'm considering what means the BOJ has for the exit and how the bank should use them," Amamiya said.

The governor and two deputy governors of the central bank will be formally appointed by the cabinet after their nominations are approved by both houses of the Diet at their respective plenary sessions.

The House of Councillors, the upper chamber, plans to conduct hearings with Kuroda, Wakatabe and Amamiya on Tuesday and Wednesday. The three's appointments are expected to obtain parliamentary approval by March 19, when the terms of the incumbent deputy BOJ governors expire. Jiji Press