After yelling in April that the Bank of Japan should maintain its ultra-loose policy, IMF once again supported the Bank of Japan, which runs contrary to global central banks, saying that it does not need to adjust its policies at present, and the weak yen is not entirely a bad thing for the economy.
On Wednesday local time, Ranil Salgado, head of the International Monetary Fund (IMF) delegation to Japan, told the media:
No matter what information the Bank of Japan tries to convey, any changes to its YCC (yield curve control) policy may be regarded as austerity action, so we believe that now is not even the time to consider this issue.
There is no doubt that Salgado sent a clear signal that the IMF supports the Bank of Japan's over- loose monetary policy . Bank of Japan Governor Kuroda Haruhiko reiterated his dovish position on Wednesday, expressing his commitment to maintaining 's loose monetary policy to support the Japanese economy.
After Kuroda Haruhiko made a statement, the yen fell, setting a record low in 1998. It is currently around 147 yen, weaker than the level when the Japanese government bought the yen last month, which also heated up the market's expectations of the Japanese government's intervention in the market again. Since the beginning of this year, the yen has fallen by more than 20% against the US dollar, making it the worst performing G7 Group currency.
The current focus of investors is how much money the Japanese government is willing to put in to save the yen and how Kuroda Haruhiko will spend his last few months of term.
Salgado also expressed his views on Japan's intervention in the foreign exchange market. he said that intervention can slow down the depreciation of the yen to a certain extent, but its effects are often short-term.
Salgado said that for the economy, the weakening of the yen is not a completely bad thing.
We can still say that the impact of the weaker yen on the Japanese economy is positive overall, but there is also an important warning that some economic sectors have been damaged, such as importers or households who purchase imported goods.
This remark is exactly the same as Kuroda Haruhiko's statement on Wednesday. He said that while certain sectors of the Japanese economy are being adversely affected by the depreciation of the yen, overall, the depreciation of the yen may have a positive macroeconomic effect.
As a typical export-oriented country, Japan's weakening of the yen has boosted the profits of Japanese companies to a certain extent. Official data show that Japanese companies' profits in the second quarter hit the highest level since 1954. Therefore, Japanese Prime Minister Kishida Fumio is urging Japanese companies to raise their wages.
In this regard, Salgado told the media:
The Bank of Japan's view is correct, we need to see that the wage growth rate has increased significantly to nearly 3% , and then the Bank of Japan can say that we have reached the (inflation) target for a long time.
Salgado said that IMF has recommended that the Bank of Japan adjust the 10-year Treasury bonds in the YCC policy to shorter term Treasury bonds in order to enhance the sustainability of the policy rather than withdraw the stimulus measures. As for corporate loans, the most important thing about is the yield curve under 5 years . If this period exceeds this period, YCC will have a greater impact on the financial stability of banks, pension funds and life insurance companies.
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