Asia Economy

Bank of Japan official says it's premature to tighten monetary policy now

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Key Points
  • Bank of Japan Deputy Governor Masazumi Wakatabe said on Thursday it was premature to normalize monetary policy now as the economy is only just recovering from the coronavirus pandemic's damage.
  • Wakatabe said consumer inflation may accelerate to around 1% in the coming months and could speed up more than expected as more companies seek to pass on higher costs to households.
  • But the BOJ must maintain its massive stimulus program as inflation expectations have yet to rise towards the bank's 2% target, he said.

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A Japanese national flag flies outside the Bank of Japan headquarters in Tokyo, Japan, on Sept. 27, 2021. The Japanese central bank has for years adopted ultra-easy monetary policy in a bid to achieve its ever elusive inflation target.
Toru Hanai | Bloomberg | Getty Images

Bank of Japan Deputy Governor Masazumi Wakatabe said on Thursday it was premature to normalize monetary policy now as the economy is only just recovering from the coronavirus pandemic's damage.

Wakatabe said consumer inflation may accelerate to around 1% in the coming months and could speed up more than expected as more companies seek to pass on higher costs to households.

But the BOJ must maintain its massive stimulus program as inflation expectations have yet to rise towards the bank's 2% target, he said.

"It would be premature to tighten monetary policy before inflation hits the BOJ's target, as doing so could cripple the economy's recovery," Wakatabe said in a speech.

A former academic, Wakatabe is considered among the most dovish members of the BOJ's board and has consistently called for keeping monetary policy ultra-loose to put a sustained end to deflation.