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BoJ to maintain easy policy even if Govt declares deflation exit – Goldman Sachs

In his latest note on the BoJ’s monetary policy outlook, Goldman Sachs Japan Chief Economist explained that the BoJ needs to maintain its ultra-loose monetary policy in order to achieve 2% inflation target.

Key Quotes via Bloomberg:

“Some in financial markets believe the Japanese government may soon declare deflation is beaten.”

“Government looking at CPI, GDP deflator, output gap, and unit labor costs as metrics to judge when deflation has ended.”

Even when satisfied, the government will want to link declaration of the end to deflation with an important political event - a "golden opportunity to publicly promote the success of Abenomics"

"Even if the government were to declare an exit from deflation, we believe the BOJ would need to maintain its current easing policy over the long term, continuously chasing the 2% inflation target."

 

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