The Bank of Japan's goal of achieving 2 percent inflation is "finally in sight" and it needs to "shift gears" from years of powerful monetary easing aimed at meeting the target, one of the central bank's board members said Thursday.
Hajime Takata, who sits on the BOJ's nine-member Policy Board, cited as options ending the central bank's negative interest rate policy and bond yield-cap program.
His remarks, made during a meeting with business leaders in Shiga Prefecture, western Japan, are the latest signal that the BOJ is moving away from monetary easing. Market expectations have heightened that an end to the negative rate policy will come in March or April.
"With monetary easing continuing, I believe we have reached a point where attainment of the 2 percent price stability target is finally in sight, despite uncertainty over the Japanese economy," Takata said.
"It is necessary to consider shifting gears from extremely powerful monetary easing...and how we should respond nimbly and flexibly toward an exit," he added.
The BOJ sets short-term interest rates at minus 0.1 percent and currently allows 10-year Japanese government bond yields to rise above 1.0 percent. In recent months, the central bank has gradually loosened its grip on long-term rates, long depressed at rock-bottom levels under a framework known as yield curve control.
The yen rose against the U.S. dollar after Takata's comments, which came after BOJ chief Kazuo Ueda said last week that Japan is "in a state of inflation" rather than deflation.
The outcome of annual wage negotiations between labor unions and management has come under the spotlight as the BOJ sees robust wage growth as crucial for attaining stable inflation. The talks will culminate in March and the BOJ's policy meeting is scheduled for March 18 and 19.
Takata pointed to a change in stance among Japanese companies on price and pay hikes, the emergence of a virtuous cycle of strong corporate earnings translating into wage growth for workers, and a shift from a deflationary mindset deeply rooted in past experience. "Japan is at an inflection point," he said.
