The Bank of Japan should stop its record bond purchases because the policy has failed to spur consumer prices and instead focus with the government on a wage target, according to a former central banker.
While BOJ Gov. Haruhiko Kuroda's asset purchases and negative interest rate policy have dragged down the benchmark 10-year Japanese government bond yield to as low as minus 0.3 percent last month, inflation is back where it was before he began his easing program 3½ years ago. Central bank purchases have sapped sovereign-note liquidity and driven volatility to the highest level since 1999.
"The lesson of the mistakes of the past three years is that just increasing the volume of money won't break the norm of prices," said Tsutomu Watanabe, who worked at the BOJ from 1982 to 1999 and now teaches at the University of Tokyo. The government should raise the minimum wage, boost civil servant salaries and charge more for its services, he said.