BoJ Deputy Governor: Tighter Monetary Policy Could Lead to a Serious Recession
Masazumi Wakatabe (Bank of Japan Deputy Governor) stated, that an attempt to prick asset-inflated bubbles with tighter monetary policy may lead the economy to a serious recession. According to him, instead of trying to preempt asset bubbles, central banks should focus on taking quick and sufficient steps to reflex growth after the financial crisis.
"Although we should not ignore asset price fluctuations completely, taking strong measures to burst the bubble could push the economy into a serious recession," Wakatabe said in a speech at a seminar. "As downward pressure is exerted on the economy in the wake of a crisis, it will be necessary to respond with vigorous expansionary macroeconomic policies," added Wakatabe.
Under its yield curve control policy, the Bank of Japan now guides short-term interest rates at -0.1% and long-term rates around zero percent in a bid to accelerate inflation to its 2% target.