Bank of Japan should monitor the rate hike and switch to a more flexible policy

The former deputy of the Japanese central bank Hirohide Yamaguchi said to Reuters that the bank should be more flexible when it comes to monetary policy. Also, Yamaguchi said that next year, this will be necessary to increase the target for a long-term interest rate. However, this will happen only if the economy can endure international risks. 

Yamaguchi, who is considered the next one to head the central bank, said that the country has already shown signs of domestic inflation. In such a situation, the growing prices make the taxpayers think the goods and services will continue to get more expensive.   

Yamaguchi was interviewed on Friday. He said that wages would likely grow thanks to stable corporate profits. Next year, this will help to keep the inflation equal to or less than the 2% target. 

The official added that the level of core consumer inflation may stay around 3-4% for a long time. The central bank should remember that as society gets used to certain prospects concerning the inflation level, the situation becomes difficult to control.