Hamada Calls for Cautious Monetary Easing

Koichi Hamada, the advisor of Japanese Prime Minister to decide next Central Bank Chief believes that the Bank of Japan should slow monetary easing if they see the effects on prices and the major currency Yen go way too far. He added that policy makers are correct in trying to raise prices and influence the Yen in the meantime. However, there should not be any reason to overdo this and when the exact time to stop monetary easing comes that may not be easy.

Incidentally, investors are currently thinking that how far the Japanese Government will let Yen slide as Abe, the Prime Minister has pledged aggressive fiscal and monetary action and that has caused 10% decline in Yen against USD in the last 2 months. Incidentally, only last week, investors got confused as the Economy Minister Akira Amari stated that excessive decline of Yen will have detrimental effects on the economy of Japan, only to state later that he was misquoted. However, Akira still commented that 110 Yen per USD would be too weak figure for Yen.

According to the Chief Economist of Nomura Holdings, Tomo Kinoshita, it will be tough for the Bank of Japan officials to slow down the monetary easing at this time and this is not the time when the easing should be slowed down either. Tomo added that the officials should be more interested in ending deflation in Japan and later, they can start worrying about inflation.

Incidentally, last week, Yen suffered a decline of 0.2% against USD and is currently priced at 90.10 per USD. Last week, it actually touched 90.21 per USD at one point of time, its weakest figure since June, 2010.

Hamada is a retired professor of Yale University and was the teacher of Masaaki Shirakawa, the current Bank of Japan Governor, at the Tokyo University.

Amari told the reporters that in the joint statement of the Government and Bank of Japan, no specific time period will be set for the price goal and it won’t be called a long term objective either. They are currently targeting to reach a price stability of 2% and the Government is entirely responsible for getting growth and fiscal consolidation in the country. He added that both the sides will try so that any sort of loss of confidence on Japan’s debt for investors can be avoided.