Koichi Hamada, the retired Yale University professor advising Japanese Prime Minister Shinzo Abe, says the Bank of Japan (BOJ) can add to already unprecedented stimulus if necessary to drive an economic revival.
Bank of Japan Governor Haruhiko Kuroda “should continue to trust in his judgment and ease further” if needed, said Hamada, 77, who was tapped by Abe last year to advise on monetary policy.
A stock slump was “a natural correction” and so-called Abenomics is working “as well or better than expected,” Hamada said.
The world’s third-largest economy grew the most in a year last quarter and the yen fell past 100 against the US dollar this month, boosting Japanese exporters such as Mazda Motor Corp.
Abe’s challenge now is to implement structural reforms to maintain a recovery threatened by volatile bond yields and a stock market that last week plunged the most in two years.
The Bank of Japan last month pledged to double bond-buying in an attempt to secure 2 percent inflation and drag the world’s third-biggest economy out of a 15-year deflationary malaise.
Board member Ryuzo Miyao said yesterday that the bank has taken all necessary steps for now.
“A level of 100 may restore the competitive conditions of Japanese industry,” Hamada said.
“I think it is not out of the question” for the currency to weaken further, he said.
The currency traded at ￥102.17 as of 4:21pm in Tokyo yesterday after a decline of about 20 percent in the past six months.
In March, Hamada endorsed a yen level of 98 to 100 per US dollar, even as he said he was scolded by the government for similar remarks that risked friction with G20 nations. Hamada yesterday rejected South Korean concerns that a weak yen is undermining that nation’s exporters.
“Under a flexible rate system, the strength of the system is that each country can take care of itself through its own monetary policy,” he said.
South Korea has its own policy instruments, so “they shouldn’t blame the Japanese central bank, they should demand the Korean central bank have a proper monetary policy,” he said.
As to his evaluation of Kuroda’s first two months in office, Hamada said: “I would avoid giving him full marks because I don’t see everything he does. I would give him about 90 percent.”