Bank of Japan must slow easing if Yen weakens too much, says Economist

TOKYO: The Bank of Japan will need to slow monetary easing if the effects on prices and the yen go too far, said Koichi Hamada, who’s advising prime minister Shinzo Abe on choosing a new central bank chief.

Policymakers are "working hard to raise prices and influence the yen," Hamada told reporters on Sunday. "If it goes too far, it should be stopped," he said after appearing with economy minister Akira Amari on an NHK television show in Tokyo.

Investors are gauging how far the government may let the Japanese currency slide after Abe’s pledges of aggressive fiscal and monetary action triggered a 10 per cent decline against the dollar from mid-November.

They got mixed signals last week, when Amari highlighted harmful effects of an excessive decline and then said he had been misinterpreted, while Hamada said 110 yen per dollar would be "too weak." "It will be difficult for the BOJ to slow its easing, but those concerns are still far away," said Tomo Kinoshita, chief economist at Nomura Holdings.

"They need to concentrate on getting out of deflation, and we can worry about inflation later." The yen slipped 0.2 per cent last week in New York and touched 90.21, the weakest since June 2010.

It ‘won’t be easy’ to slow monetary easing when it becomes necessary, said Hamada, a retired Yale University professor who taught Bank of Japan governor Masaaki Shirakawa at Tokyo University.