Ex-BOJ’s Yamamoto: The central bank should review its 2% price target

The central bank’s 2%price target could be made more flexible, and perhaps reshaped as a medium-, or longer-term objective, Kenzo Yamamoto, a former Bank of Japan (BOJ) Executive Director told MNI in an interview on Friday.

Key quotes

“The BOJ should also drop its cap on yields of 10-year government bonds, currently enforced by unlimited daily fixed-rate bond-buying operations.”

"The average price gap between the U.S. and Japan for the 29 years from 1993, when core Japanese CPI fell below 2%, until 2021 is estimated to be about 1.8 percentage points.”

“Japanese inflation would only reach 2% when the rate of increases in U.S. prices was considerably higher.”

"Despite economic growth, the 2% price target hasn't been achieved, which shows that the 2% target is too high.”

Market reaction

The US dollar pullback and the verbal intervention by the Japanese authorities have dragged USD/JPY back below 129.00. The pair is trading at 128.78, adding 0.37% on the day.