Former BoJ policy maker Takahide Kiuchi said the central bank is unlikely to ease further due to risks of banking-sector problems. He said, “Japan will likely see more small and midsized firms go under as the pandemic’s pain deepens, which could boost credit costs for lenders through next year… The pandemic has forced the BOJ to be more mindful of the risk of banking-sector problems, which means it can’t cut interest rates easily,”
Kiuchi expected GDP to take around give years to return to pre-pandemic levels. Also, core consumer inflation will hove in “slightly negative territory for about three years”. Nevertheless, “the BOJ has already detached its policy from its 2% inflation target, which means it won’t take action to prop up prices.”
