Bank of Japan should consider buying foreign bonds says Shinzo Abe adviser

Vastavam web: The Bank of Japan should consider buying foreign bonds as part of efforts to reflate the economy during Governor Haruhiko Kuroda’s second term at the central bank helm, an economic adviser to Prime Minister Shinzo Abe said.The Bank of Japan should consider buying foreign bonds as part of efforts to reflate the economy during Governor Haruhiko Kuroda’s second term at the central bank helm, an economic adviser to Prime Minister Shinzo Abe said.

“Under the BOJ law, the finance ministry holds jurisdiction over currency policy. But I hope Kuroda would consider having the BOJ buy foreign bonds,” Koichi Hamada, an emeritus professor of economics at Yale University, told Reuters in an interview on Thursday.Hamada said while the central bank cannot buy bonds for the sake of affecting exchange rates, it could do so “as a means for delivering proper monetary policy for Japan.”The government last week reappointed Kuroda for another term and chose an advocate of bolder monetary easing as one of his two deputies, a sign policymakers are in no rush to turn off a sweeping stimulus program.

The announcement did little to reverse the yen’s recent rises against the dollar, which has drawn verbal warnings by Japanese policymakers worried of the pain a strong yen could inflict on an export-reliant economy.Under its huge asset-buying program to prop up inflation to its 2 percent target, the BOJ has been buying government bonds and risky assets such as exchange-traded funds (ETF).

Critics say the BOJ’s buying has dried up bond market liquidity and caused distortions in the stock market, leaving the central bank with little ammunition to stave off external shocks to the economy such as the hit from a strong yen.The dollar has been weighed down by a variety of factors this year, including concerns Washington might pursue a weak currency strategy and the perceived erosion of its yield advantage as other nations start to scale back easy money policies.

Hamada praised Kuroda’s policies for helping revive growth, saying it was “understandable” that the government decided to reappoint him for another five-year term.