BOJ's Sakurai: Japan needs to stick with current easing framework

TOKYO: Bank of Japan board member Makoto Sakurai said on Monday the central bank needs to stick with its current easing framework to support improvements in the job market and consumer prices.

Momentum toward achieving the BOJ's price stability target remains intact, but the bank might need to maintain easy policy for a longer period because improvement in the labour market is slow, Sakurai said in a paper submitted to a seminar in Italy.

"Although price rises are being constrained at present, the momentum toward achieving the price stability target is being maintained," Sakurai said, according to a copy of the paper posted to the BOJ's website.

"It is essential, therefore, for the (BOJ) to continue to conduct monetary policy under the current framework for the time being."

In order to meet its 2 percent inflation target, the BOJ guides short-term interest rates at minus 0.1 percent and buys government debt so the benchmark 10-year bond yield remain at around zero percent.

Policymakers need to monitor whether the BOJ's quantitative easing is causing unwanted side effects by hurting banks' profits, Sakurai also said in the paper.

Past economic downturns in Japan led to some discouraged job seekers giving up on employment and pushed other workers into contract work with lower pay than regular employees, Sakurai said.

These two factors contribute to lower inflation, because the damage the supply-side of the economy.

More women and elderly people have been entering the workforce, but since their wages tend to be lower, this restrained overall wage growth, Sakurai said.

However, there were signs that the labour market would improve as companies started shifting workers to regular status.

These improvements would take time, which means the BOJ needed to keep policy accommodative, Sakurai said.