BoJ’s easing stance fuels yen undervaluation dilemma

Japanese policy-makers need to consider feedback loop that an undervalued yen has on cost-push inflation; reflect on YCC exit options in ‘broad perspective review’, writes Sayuri Shirai

The Bank of Japan maintained its monetary easing policy with yield curve control – adopted by previous governor Haruhiko Kuroda, and in place since 2016 – at its June 16–17 monetary policy meeting. The decision came as no surprise, as new governor Kazuo Ueda has stressed the importance of achieving demand-driven 2% inflation.

Ueda has said tightening monetary policy under the current cost-pushed inflationary environment would only damage the economy and employment conditions. The BoJ expects

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