TOKYO May 30 The Bank of Japan should provide
more information about its asset purchases beyond end-2014 to
enhance transparency of its policy, the International Monetary
Fund said on Friday.
With Japan making steady progress in accelerating inflation,
the central bank does not need to expand stimulus further now
and should preserve its policy space to address future downside
risks, the IMF said in its concluding statement after its annual
Article 4 meeting with Japanese officials.
"However, the current aggressive pace of monetary easing may
need to be maintained for an extended period, suggesting that
providing more information about asset purchases beyond end-2014
could further enhance transparency," it said.
While the BOJ's stimulus is delivering anticipated effects,
Japan will see consumer inflation reach 2 percent by 2017, later
than envisaged by the central bank, because the narrowing of the
output gap and heightening of inflation expectations will be
more gradual than BOJ projections, the IMF said.
The BOJ deployed an intense burst of monetary stimulus in
April of last year, pledging to double base money via aggressive
asset purchases to achieve its 2 percent inflation target in
roughly two years.
BOJ Governor Haruhiko Kuroda has voiced confidence that the
central bank's price target will be met sometime next year.
The central bank has disclosed the pace of asset purchases
for meeting its balance sheet target up to the end of this year,
but has been silent on whether that pace will be maintained
beyond next year for fear of binding its hands on future policy.
The BOJ should act quickly if inflation or inflation
expectations stagnate, or if economic growth disappoints, the
IMF said, adding that possible options include expanding
purchases of private assets or government bonds, or further
lengthening the maturities of assets it purchases, the statement
Another option would be to expand a separate funding scheme
the BOJ has in place to encourage financial institutions to
boost lending by offering cheap, long-term funds, the IMF said.
The global lending institution, however, warned of the risks
of overburdening monetary policy and said that when an exit from
the ultra-loose monetary policy comes into sight, the BOJ should
clarify the conditions under which it will determine that its
price target has been achieved.
(Reporting by Leika Kihara; Editing by Edmund Klamann)