Advice for the BOJ from the Organisation for Economic Cooperation and Development (OECD), the OECD 2024 report on Japan.
Says that if inflation stays around its 2% target and is accompanied by sustained wage growth:
- Bank of Japan should gradually raise short-term interest rates
- should make its bond
yield control policy more flexible (referring to BOJ yield curve control (YCC))
- such as by raising the 10-year bond yield target or moving to a short-term yield target
"Japan is at a turning point, with inflation more likely to settle durably around the 2% inflation target than at any time since its inception,"
- "Greater flexibility in the conduct of yield curve control and a gradual modest increase in the short-term policy interest rate are warranted, based on projections of sustained inflation and wage dynamics,"
- warned that uncertainty around Japan's inflation outlook was "exceptionally large."
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As we all know, BOJ Governor Kazuo Ueda has stressed the bank's resolve to keep ultra-loose policy settings intact until sustained achievement of 2% inflation, accompanied by durable wage rises, comes into sight.
Related from earlier today:
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Bank of Japan Governor Ueda does not need advice from the OECD
