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Head of Japan bank lobby calls for review of BOJ's price goal, easy policy

Reuters  |  TOKYO 

By and Uranaka

TOKYO (Reuters) - The of Japan's lobby on Thursday urged the of to review its 2 percent inflation target and ultra-loose monetary policy, saying that sticking with its elusive inflation goal would do more harm than good.

Six years of by the central has made clear that Japan's economy can recover even amid low inflation, said Koji Fujiwara, of the

"The BOJ should not persist in achieving its price target both in terms of the timeframe and pace of price growth," as subdued inflation is forcing it to maintain a radical stimulus that is straining bank profits, he said.

One idea could be to replace the BOJ's 2 percent inflation target with a target range on desirable price growth, which would enhance flexibility on monetary policy, Fujiwara said.

"While it may be difficult to do so immediately, the BOJ should cautiously but steadily take measures" to stock up its policy ammunition in case it needs to ramp up stimulus in the future, Fujiwara said.

"The BOJ may be approaching a stage where it needs to review its price target" and its ultra-easy policy, he said.

The comments by Fujiwara, who added that they reflect his "personal view," were the strongest to date from Japan's lobby calling for a review of the BOJ's policy framework.

Fujiwara is also of Mizuho Bank, a core unit of Japan's second-largest lender

The BOJ is caught in a dilemma. Years of heavy stimulus have failed to fire up inflation, forcing the bank to maintain its massive bond buying programme despite financial institutions having to endure weak profits from near-zero rates.

(MUFG) 8306.T, Japan's largest lender by assets, earlier this month reported a 6.4 percent decline in net profit for the three months through December.

BOJ has said the central bank will maintain its ultra-loose policy to help improvements in the economy steadily accelerate inflation. But he has also said the BOJ would carefully look at the benefits and costs of stimulus.

"The demerits of ultra-loose policy are cumulative and it's hard to deal with them once they materialise. That's why it's necessary to conduct monetary policy in a forward-looking manner," he said.

Japan's annual core consumer inflation hit a seven-month low of 0.7 percent in December and may ease further in coming months due and soft household spending.

Adding to the BOJ's headaches, a slowdown in the world economy has jolted markets and led the to cut its global economic growth forecasts.

(Reporting by and Uranaka; Editing by Kim Coghill)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Thu, February 14 2019. 14:16 IST