By Leika Kihara and Kentaro Sugiyama
TOKYO (Reuters) – The Bank of Japan has little leeway on how and when to cut stimulus measures given the scale and sweeping nature of its policies, said Kunio Okina, an academic known as a outspoken criticism of Governor Haruhiko Kuroda’s monetary experiment.
Missing its 2% inflation target for nearly a decade, the BOJ’s lead role shifted to supporting fiscal policy by capping the cost of financing Japan’s huge public debt. said Okina, a former BOJ official and prominent scholar who maintains close contact with incumbent policymakers.
âThe most important job for the BOJ going forward is to help finance Japan’s fiscal policy, as there is little that monetary policy can do to fight another crisis,â Okina said.
Given the crucial role of the BOJ in keeping the cost of financing Japan’s huge debt low, an exit from the ultra-relaxed politics will take years and will require the consent of the government, he said. .
“An exit strategy may be necessary. But this is no longer something the BOJ can independently decide,” Okina told Reuters in an interview on Wednesday.
Chosen by then Prime Minister Shinzo Abe to lower inflation to 2%, Kuroda rolled out his “bazooka” asset purchase program in 2013, followed by a series of little monetary easing measures. Orthodox to support economic growth.
But the silver wall has failed to accelerate inflation, forcing the BOJ to hold on to its huge stimulus longer than expected and shift in 2016 to a policy that caps long-term interest rates around 0. %.
After years of intensive buying, the BOJ now owns half of Japan’s government bond market. It also buys risky assets such as exchange-traded funds (ETFs) with holdings reaching around 50 trillion yen ($ 454.50 billion), making it the largest holder of Japanese equities.
“Having ventured into such drastic measures, it will not be easy to normalize monetary policy” even after Kuroda’s term ends in 2023, said Okina, now a professor at the University for Women of Otsuma.
“The BOJ has very little leeway or jurisdiction over its next move, including when to get out of easy politics.”
($ 1 = 110.0100 yen)
(Reporting by Leika Kihara and Kentaro Sugiyama; Editing by Michael Perry)