BoJ Member Sato Says Expect More Stimulus From Central Bank If Needed, Looks To Soften Stance On Inflation Target

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Sato- BoJ
Bank of Japan board member Takehiro Sato speaks during an interview with Reuters at the central bank in Tokyo September 26, 2012 file photo

The Bank of Japan, or BoJ, could provide additional stimulus if global economic conditions threaten Japan's recovery, Takehiro Sato, a member of the central bank's board, said on Monday, while seeming to soften his stance on the bank's 2 percent inflation target, which he said could be achieved over a period of two years only if inflation picked up soon.

Sato, who was earlier known for his cautious views about the Japanese economy's recovery, in a speech before business leaders in Fukushima City, painted a hopeful picture of the country's future. 

Sato shared the BoJ's view that Japan’s economy is headed toward moderate but sustained growth. However, he expressed concern that the economic slowdown in China, and a slow recovery in the euro zone, could threaten the global economic outlook.

"The BOJ doesn't exclude the implementation of additional measures and will not hesitate to fine-tune its policies flexibly when unexpected tail risks materialize," Sato said.

Sato, who had also opposed the BoJ's target of achieving a 2 percent inflation rate in two years, said: "Unless inflation expectations rise soon, the possibility of achieving the price stability target of exactly 2 percent with a time horizon of about two years is not necessarily high," Sato said, according to MNI News.

However, Sato said there should be some flexibility in interpreting the central bank’s target.

"I understand that the BOJ's monetary policy framework - in which the BOJ sets the 2 percent price stability target - is a flexible one, in the sense that it focuses mainly on maintaining the 2 percent target in a stable manner rather merely on achieving the target exactly," he added.

Although, the BoJ minutes did not identify the members’ names, it is believed that Sato was one of two board members among the nine-member board, who had earlier opposed the central bank’s inflation target set in April, saying it was unattainable.

BoJ Governor Haruhiko Kuroda had, in April, announced a slew of stimulus measures, to extract Japan’s economy from a two decade-long deflation, and had set a time-frame of two years to achieve a price target of 2 percent.

At its latest policy meeting held on July 10-11, the BoJ board unanimously decided to maintain the bank's inflation target unchanged, while it upgraded its outlook of the country’s economy.

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