Bank of Japan (BOJ) board member Goushi Kataoka criticized on Friday the central bank’s decision in July to make its policy framework more sustainable, arguing that it should have instead ramped up stimulus to hasten the achievement of its elusive price target.
He also warned that escalating trade frictions could weigh on Japan’s export-reliant economy by slowing global economic expansion next year.
“Global trade frictions are intensifying and there’s no room for complacency,” Kataoka said in a speech to business leaders in Yokohama, a city near Tokyo.
Kataoka, who opposed the BOJ’s decision in July to take steps to address the rising costs of prolonged easing, said it was counter-productive to allow long-term yields to rise at a time inflation remained low.
“There’s no need to allow long-term interest rates to move in a wider range at a time when the BOJ is cutting its inflation forecasts,” he said.
“Allowing long-term rates to rise at a time inflation and inflation expectations aren’t heightening much could delay achievement of the BOJ’s price target,” Kataoka said, adding that the BOJ must instead take additional easing measures to fire up inflation.
Under its yield curve control policy, the central bank guides short-term interest rates at minus 0.1 percent and the 10-year government bond yield around zero percent.
With years of ultra-low rates squeezing bank profits and drying up bond market liquidity, the BOJ decided in July to allow long-term rates to move more flexibly around its target.
Kataoka, a vocal advocate of aggressive easing, has consistently voted against the BOJ’s decision to keep monetary policy steady and has called for the BOJ to ramp up stimulus to achieve its inflation target.
Kataoka repeated his calls for the BOJ to expand stimulus by seeking to further push down borrowing costs for periods of 10 years and longer, arguing that such a step would boost capital spending.