INTERVIEW: BOJ's Unorthodox Easing "Hit Limit" in 2015

Tokyo, Jan. 28 (Jiji Press)--Former Bank of Japan Policy Board member Sayuri Shirai has said that the central bank's unprecedented quantitative and qualitative monetary easing regime, characterized by massive purchases of mainly Japanese government bonds, "reached its limit" around the second half of 2015 as the bank was struggling to meet its 2 pct inflation target.

In December 2015, the BOJ decided to introduce supplementary measures for the unorthodox easing regime, such as additional purchases of exchange-traded funds and purchases of JGBs with longer periods to maturity.

"The scale of asset purchases had become too large, causing the JGB market and other infrastructure to start collapsing," Shirai, now professor at Keio University, said in a recent online interview.

"It was becoming difficult to buy JGBs at promised prices, so we needed to take measures, such as buying JGBs with longer periods to maturity," she said.

At the time, the Japanese economy was gradually recovering from the impact of the 2014 consumption tax hike, but the improvement was slow, Shirai said. "Stagnant inflation was the biggest problem," she said, noting that prices were weak, even excluding the effects of lower energy prices.

[Copyright The Jiji Press, Ltd.]