BoJ’s Shirai says Japanese forward guidance is different from BoE and Fed's

The Bank of Japan's (BoJ) forward guidance has important differences to that employed by other central banks, according to Sayuri Shirai, a member of the BoJ's policy board.

Speaking at both the International Monetary Fund and the Federal Reserve in Washington, DC, Shirai explained the Bank of Japan's guidance was a two-stage process, first to signal the BoJ's "strong determination" to reach its 2% target and second to stress that asset purchases will continue until prices "stabilise around" the target.

Shirai emphasised that while central banks such as the Fed and Bank of England (BoE) were aiming to anchor expectations at a 2% rate of inflation, the BoJ was attempting to cut them loose and allow them to rise to the 2% target before anchoring them again. She added that a commitment to a certain level of unemployment would have little use in Japan – unemployment is currently 3.8%.

She dismissed an interpretation offered by the Bank of England that the process was "open-ended", saying this was "not consistent" with her interpretation. "My opinion is that the Bank's forward guidance is multi-layered, largely state-contingent and focuses on the 2% price stability target with a strong (conditional) commitment," she said.