The Bank of Japan doesn’t have to loosen its monetary grip now, as its drastic easing steps introduced last April have been functioning well, a senior International Monetary Fund official said Wednesday.
But Jerry Schiff, deputy director of the IMF’s Asia and Pacific department, also called on the BOJ to act if recent confusion in global financial markets starts to hamper the central bank’s efforts to achieve its 2 percent inflation target.
“The Bank of Japan’s new policy framework has so far been quite successful,” Schiff said during a meeting with reporters in Tokyo. “As long as inflation and inflation expectations continue to rise toward the 2 percent target, we don’t see the need for further easing.
“However,” he added, “Especially in light of recent turmoil in global markets, the BOJ needs to watch developments closely and take necessary action if the recovery and rising inflation show signs of stalling.”
A widespread selloff in emerging currencies has made stock and foreign exchange markets volatile across the globe, blurring the outlook for the world economy.
Some analysts are worried that if financial markets remain unstable, it could take a toll on Japan’s economy, which is highly likely to lose momentum following the sales tax hike to 8 percent in April.