With all eyes still focused on the next Fed interest rate hike, the Bank of Japan reported that it is prepared to continue its program of quantitative and qualitative monetary easing (QQE) as long as necessary to meet its 2% inflation goal, but is prepared to make adjustments if necessary.
According to Sayuri Shirai, a member of the BOJ Policy Board, financial stability is not a major concern at the moment, but he added that the BOJ is keep a close eye on what is happening.
Speaking at the Asian central bankers’ panel at the San Francisco Federal Reserve Bank's Asian Economic Policy Conference, Shirai said that in Japan "macro-prudential policy is incorporated in monetary policymaking."
Fiscal Consolidation
Shirai is certain that in the long run Japan must achieve "fiscal consolidation" to reduce its 250% debt to GDP ratio, but she believes that the large ratio can be offset by Japan's large current account surplus and asset holdings.
"We're doing very aggressive monetary accommodation," she said, adding that "we will continue QQE as long as we find it necessary to achieve 2% (inflation) in a stable manner."
One of the areas discussed at the San Francisco conference by Fed President and conference host John Williams was how international monetary cooperation can be enhanced and Shirai stressed the need for the Fed, the BOJ and other major central banks to maintain their currency swap arrangements to provide liquidity during times of financial instability.