Japan's Monetary Policy a 'Big Experiment'
Japan is in the middle of a "big monetary experiment," from which market volatility should be expected, the Bank of England's Ben Broadbent told CNBC on Thursday.
"Japan, of course, is in the midst of what amounts to a big monetary experiment, so I think we should see the volatility in equity markets and indeed in bond markets in that context," said Broadbent, who is a member of the Bank of England's Monetary Policy Committee.
His comments came after the Japanese Nikkei plummeted 7 percent on Thursday on strength in the yen, a spike in Japanese government bond yields and new evidence of weakness in China's economy.
The yen holds an inverse correlation with the Nikkei as strength in the currency is seen as negative for the market that has a heavy concentration of exporters.
Markets were also rattled by Wednesday's comments by Federal Reserve chief Ben Bernanke. U.S. stocks fell nearly 1 percent at the close on Wednesday after Bernanke's testimony to the U.S. Senate on Wednesday, and the publication of minutes from the Fed's last policy meeting.
However, Broadbent described Bernanke's speech as "unsurprising."
"I do not see his remarks as particularly surprising. ... In any cycle, when you get to a point where there is a possibility of monetary easing reversing itself … markets will get jittery," Broadbent said.
(Read More: Bernanke: Too Soon to Taper Bond Buys)
Japan, the world's third largest economy, is making a concerted bid to revive its economy and end two decades of deflation. As part of that effort, the Bank of Japan launched an aggressive monetary policy strategy last month that has taken the once cautious central bank into uncharted territory.
The BOJ ended a two-day meeting on Wednesday with a decision to leave this monetary policy unchanged and a promise to monitor its volatile government bond market. It also maintained a commitment to increase base money—cash and deposits held at the central bank—at an annual pace of 60 to 70 trillion yen ($585 billion to $682 billion).
Broadbent joined the Bank of England in 2011. He was formerly an economic adviser for the U.K.'s Treasury, and an assistant professor of Economics at Columbia University from 1997-2000. For the decade prior to his appointment to the BoE, Broadbent was senior European economist at Goldman Sachs.