IMF said in a report that BoJ’s commitment to maintaining prolonged monetary accommodation remains “appropriate”. It expects that a “prolonged period of monetary policy accommodation, flexible fiscal policy, and inclusive growth-oriented reforms will be required to durably lift inflation expectations and inflation to the target.”
Further measures could be considered for making monetary support “more sustainable”. On option could be to “steepen the yield curve by shifting the yield target from the 10-year to a shorter maturity”. This could help “mitigate the impact of prolonged monetary accommodation on financial institutions’ profitability”. If underlying inflation momentum remains weak, “cutting the policy rate should be the first option”.
