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MNI INTERVIEW2: Doubt Over Policy Impact On Capex: Ex-BOJ Aide


Use of estimates in analysis can lead to errors, ex-BOJ's Sekine says

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There is insufficient evidence that the Bank of Japan's latest policy decision to allow the ten-year JGB yield to fluctuate in a range 25 bps either side of zero percent has any material impact on boosting capital investment, a former chief economist at the central bank told MNI.

Recent analysis by bank staff on the impact was 'in depth' but there are doubts over the accuracy due to the errors that can arise from the use of estimates, Toshitaka Sekine, professor at the School of International and Public Policy at Hitotsubashi University, said in an interview.

The BOJ confirmed a permitted trading range for the 10-year JGB yield in its March policy statement, making an implicit market understanding official. The decision was taken largely on research that suggested monetary action had limited impact on business fixed investment, "except when the range of fluctuations in 10-year JGB yields over the preceding six months exceeds 50 basis points."

In previous policy reviews, including the September 2016 one, there was little clear evidence that increasing money or quantity was meaningful and the BOJ should clarify its latest analysis through additional working papers, increasing the understanding of its position.

Sekine hopes bank staff can foster a broader understanding of policy by disclosing details of their analysis showing that the tolerated 10-year yield range hasn't had a significant impact on capex.