Former Federal Reserve Chairman Bernanke

  • Want to reaffirm importance of boj's pursuit of 2 pct inflation target
  • Important aspect of BOJ's inflation target is it will lead to future economic stability
  • If japan's inflation rises to 2 pct in 2018, this would reduce debt/gdp ratio by around 21 pct
  • Despite improvement in Japan's economy, there is still a strong case for BOJ to continue with 2 pct inflation target
  • I see BOJ's inflation overshoot commitment and YCC as constructive developments
  • BOJ will likely to be able to control jgb yields with smaller volumes of purchases
  • Transmission mechanisms for BOJ have approached their limit

And, more:

  • BOJ policy combined with fiscal stimulus could help inflation reach 2%
  • Cannot rule out the possibility BOJ will have to do more
  • One option is for the government to commit to fiscal spending and Bank of Japan to commit to keeping the debt to GDP ratio the same
  • BOJ could allow overshoot of inflation to offset rise in debt/GDP ratio