TOKYO (Reuters) – The Bank of Japan (BOJ) should not necessarily stick to its 2% inflation target, the head of the country’s banking industry lobby said on Thursday, highlighting Japanese banks’ struggle to grow earnings under massive easing monetary policy.
The remark came after the International Monetary Fund (IMF) said in its Article 4 policy proposal last year the BOJ should consider increasing policy flexibility by introducing an inflation range target.
Makoto Takashima, chairman of the Japanese Bankers Association, welcomed the proposal by the IMF and said it raised a good question about how monetary policy should be operated.
“I think the BOJ should not necessarily stick to 2% inflation target as the structure of our society and economy has been changing,” Takashima told reporters at a monthly news conference.
Earlier this week, the IMF also released a staff report saying the BOJ should conduct a comprehensive review of its policy objectives.
The inflation rate remains well below the target despite years of heavy money printing and a low-rate policy pursued by the BOJ in its efforts to revitalise the economy.
Japanese banks have been hard pressed to grow profits under the low-rate environment. The nation’s three major banks – Mitsubishi UFJ Financial Group Inc <8306.T>, Sumitomo Mitsui Financial Group Inc (SMFG) <8316.T> and Mizuho Financial Group Inc <8411.T> – all posted decline in net interest income in the latest quarter through December.
“Profit decline in financial sector is caused by the side effect of the BOJ’s low-rate interest policy,” said Takashima who is also the head of SMFG’s core banking unit.
(Reporting by Takashi Umekawa; Editing by Kim Coghill & Shri Navaratnam)