MNI POLICY: BOJ Kataoka: BOJ Should Tie Policy Rate To Prices

The Bank of Japan should correlate policy interest rates to a price target and vow to take action if prices deviate from the goal, BOJ board member Goushi Kataoka said Thursday.

"The BOJ should show its stance not to accept a price fall in order to increase the confidence toward price target," Kataoka told business leaders in Naha City via an online conference.

Kataoka, who has previously called for reviewing policy framework, noted the risk that real interest rates woul rise and that the degree of accommodative has fallen.

PRICES

The expected inflation rate fell slightly and the pace of economic recovery will remain modest. It is difficult to predict the achievement of the 2% price target based on an improvement of the output gap and the expected inflation rate.

According to Kataoka, consumer spending will be under pressure for the time being as the full consequence of coronavirus hasn't yet been seen. He also voiced concern over downward revisions to capital investment due to the ongoing effects of the pandemic.

The board member also noted that the worsening of overseas demand has hit bottom, but exports were unlikely to gain upward momentum anytime soon.

He also said the BOJ needed to pay attention to the possibility that if downside risks to overseas economies materialized, the global economic slump will be prolonged and become worse, which will have strong impact on firms' and households' sentiment as well as global financial and capital markets.