The Bank of Japan will gradually build a case for a major overhaul of its stimulus framework in the second-half of next year, using the results of a review to support its move.
Gov. Kazuo Ueda is aware that the current "yield curve control" stimulus framework is unsustainable, as it distorts prices, lacks flexibility, requires large purchases of government bonds and leaves the yen vulnerable to speculators, Taro Kimura of Bloomberg Economics wrote in a report Tuesday.
But from Ueda’s experience as a board member who voted against a premature rate increase in the early 2000s, the governor is also wary of abandoning stimulus too quickly, Kimura wrote. He will instead use the review to support a case for ambitious change after a modest start at the helm, he said.