BOJ's Adachi: Too early to change ultra-easy monetary policy

Bank of Japan Governing Board Member Seiji Adachi said it was too early to phase out ultra-loose monetary policy given the high uncertainty about the price outlook. Bank of Japan Governing Board Member Seiji Adachi said it was too early to phase out ultra-loose monetary policy given the high uncertainty about the price outlook. Risks to the long-term price outlook are tilted to the downside amid growing signs of weakness in the global economy, while consumer inflation in Japan is accelerating faster than initially expected. A downturn in the U.S. economy in particular would significantly hurt Japan’s economy and weigh on prices, Adachi said. “Amidst the huge uncertainty over the price outlook, there are upside and downside risks. But in the long run, the downside risks loom larger. We should carefully consider such risks when considering whether to change monetary policy,” Adachi told business leaders in Kagoshima, southern Japan. Markets have been seething with speculation the BOJ will soon change its yield curve control (YCC) policy, which has been criticized for distorting market prices and squeezing profits at financial institutions. Adachi argued that distortions in the shape of the yield curve have been eliminated and there is no need to change the YCC now. “We are seeing some changes in the public’s deflationary mindset, or the perception that prices will not rise. In a sense, we are getting closer to achieving our price target. But there is high uncertainty over our underlying inflation outlook, so it is premature to change monetary policy,” he said.