Ideal BOJ exit strategy from ultra-easy policy divides economists
Japan Today -- Jun 15
If and when the Bank of Japan should reveal its plans to exit its ultra-loose monetary policy has split economists polled by Reuters, with the economy showing signs of recovery even though inflation remains far below the central bank's target.

The economists are also divided on the central bank's ability to communicate its exit strategy without causing market turmoil.

After three years of massive asset-buying failed to lift inflation, the BOJ switched tactics last year to target long-term interest rates through its buying of Japanese government bonds.

So far, this tactic has also failed to spur inflation to anywhere near the central bank's 2 percent target rate.

But with signs of economic improvement, talk is emerging about the central bank's exit strategy - how and when it will start to taper its massive bond-buying and raise interest rates.

The central bank faces a tricky balancing act. It must convince markets it has a game plan, but if it reveals too much too quickly, investors could send bond yields sharply higher and destabilise the market.

Last week, the head of Japan's life insurance lobby called on the BOJ to begin as soon as possible to openly debate how it will bring ultra-easy monetary policy to an end.

Some economists have urged the bank to reveal small parts of its strategy a little at a time to communicate adequately but without spooking markets.

News source: Japan Today
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