Toshihiro Nagahama is an economist at Dai-ichi Life Research Institute and a participant in a key government panel
- was invited to speak at the panel’s special session on economic policy held May 15
- Says the Bank of Japan (BOJ ) may abandon its bond yield cap this year if risks clouding the outlook, such as global banking sector woes, subside
- said Japan must avoid removing monetary and fiscal support prematurely to ensure recent positive signs in wage and consumption are sustained
- Until there is clarity that wages will keep rising steadily next year, the BOJ must hold off raising its short-term interest rate target from the current level of -0.1%
- As long as short-term borrowing costs are kept low, however, the BOJ could remove a 0.5% cap set on the 10-year bond yield without causing too much damage to the economy
- The BOJ will probably wait until concern over global banking sector woes and the U.S. debt ceiling standoff eases
- “Once such risks subside and markets remain calm, the BOJ may tweak yield curve control,” Nagahama said. “I won’t be surprised if such a move occurs this year.”
Nagahama info comes via an interview he gave with Reuters.