BOJ’s Nakamura stresses need to maintain ultra-loose policy

BOJ's Nakamura stresses need to maintain ultra-loose policy
A man walks past the Bank of Japan (BOJ) building in Tokyo, Japan on Jul 29, 2016. (File photo: Reuters/Kim Kyung-Hoon)

TOKYO: The Bank of Japan (BOJ) must maintain massive stimulus to support an economy facing a resurgence in COVID-19 infections and slowing global demand, one of its board member said, reinforcing the BOJ’s outlier status in a global wave of monetary tightening.

BOJ board member Toyoaki Nakamura said on Thursday (Aug 25) the outlook for Japan’s economy was clouded by a renewed spike in pandemic cases, lingering supply constraints and persistent rises in global commodity prices.

Market jitters over aggressive interest rate hikes by major central banks to rein in rampant inflation could also trigger an outflow of capital from emerging economies, and hurt global growth, Nakamura added.

Such risks, and the fact Japan’s output gap remains negative, justify keeping monetary policy ultra-loose, he said.

“Japan’s economy is still in the midst of recovering from the pandemic-induced slump,” Nakamura told a speech.

“Shifting to a monetary tightening stance, at a time when demand remains short of supply, would hurt the economy and act as a big restraint to household and business activity,” he said.

Source: Reuters/st