- Efforts to restore fiscal health important when BOJ seeks to exit QQE
- Success of QQE hinges on government’s commitment to fiscal reform
- Have proposed making BOJ’s price target a flexible one with room for some allowance
- BOJ’s tools to respond limited if concern over government’s commitment heightens, raises risk premium in JGB market
- Prices reflect state of economy and are not a variable that can be controlled by a central bank
- What’s important is not to focus on monthly fluctuations of CPI but to scrutinise wide range of data in forward-looking manner
- Dissented from October 31 easing as virtuous cycle of economic activity and prices was basically intact
- marginal effect of expanding QQE won’t be large given nominal interest rates already at historically low levels
- Must watch whether BOJ’s asset buying creates distortions in economic activity or accumulation of financial imbalances
- There is uncertainty on whether global economic growth will steadily heighten as IMF projects
- Must be mindful of risk of Europe experiencing prolonged low inflation or slipping into deflation
- Expect Japan’s economy to recover moderately as a trend as exports have stopped falling
- Risks to Japan’s economy are exports, effect of weak yen on domestic demand, and outlook of household, business sentiment
- Japan CPI growth may stall until around middle of next year given commodity price moves
- Commodity price falls positive for Japan’s economy, will push up overall prices in long run
Headlines via Reuters
Sato will be speaking again at 0500GMT at a news conference
