OECD urges the Bank of Japan to gradually raise short-term interest rates

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.”

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:

Bank of Japan Governor Ueda does not need advice from the OECD

This article was written by Eamonn Sheridan at www.forexlive.com. Source