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