TOKYO : The Bank of Japan must steadily raise interest rates to guard against the risk of inflation accelerating well above its 2 per cent target, said Takeo Hoshi, an academic with knowledge of the country's monetary policy.
"Unless the BOJ raises rates, inflation could accelerate too much. The kind of inflation seen in the U.S. and Europe could very much happen in Japan," said Hoshi, who has close ties with incumbent BOJ policymakers. "In deciding when to shift policy, the BOJ must also take into account how its U.S. and European counterparts move as that could affect asset prices including exchange rates," he said.
BOJ Governor Kazuo Ueda has said the central bank intends to hike rates to levels considered neutral to the economy, as long as growth and inflation move in line with projections. Hoshi said the recent rise in 10-year yields was a"good sign" that showed the BOJ's decision to end its bond yield control was allowing yields to be driven more by market forces.
Source: Loan Digest (loandigest.net)
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