The coronavirus shock is boosting the amount of money flowing into Japan's economy and may fire up inflation, achieving what years of ultra-loose ...
The coronavirus shock is boosting the amount of money flowing into Japan's economy and may fire up inflation, achieving what years of ultra-loose monetary policy failed to do, the central bank's former top economist, Hideo Hayakawa, said on Tuesday.
The Bank of Japan has been printing money aggressively for years as part of a policy of quantitative easing, hoping to spur consumption in the world's third biggest economy and reach an elusive inflation target of 2per cent.But most of the money piled up in financial institutions' reserves instead of spreading out across the economy, as risk-averse Japanese firms stayed wary of boosting spending.
"Money is flowing into companies and households, leading to a surge in savings," Hayakawa, whose views are closely tracked by incumbent policymakers, told Reuters."Consumption could boom once the pandemic subsides, pushing up growth and inflation." "But you never know how COVID-19 could affect prices. The biggest fear for the BOJ is a steady rise in inflation," he said, adding that such an increase would force the bank to consider whittling down stimulus without sparking an unwelcome spike in yields.
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