BoJ Board member Harada this week refuted criticism that the Bank’s prolonged monetary easing poses a major threat to financial stability. We share his view that those concerns are overdone, which is one reason why we expect policymakers to keep policy loose for a prolonged period. Admittedly, the latest wage data suggest that the Bank is making progress towards hitting its inflation target. But we think that the jobless rate is now close to a floor so wage growth may never reach the rates necessary to generate 2% inflation.
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