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Ex-BOJ Shirai calls for more flexibility in bond buying

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TOKYO — Former Bank of Japan board member Sayuri Shirai said on Sunday Japan’s economic conditions justify the current low interest rate environment, but added that the central bank should make its government bond buying more flexible.

Some market players pay close attention to Shirai’s views as she is seen as among candidates to become deputy governor as Governor Haruhiko Kuroda’s five-year term ends on April 8 and the term of his two deputies also expires on March 19.

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Prime Minister Fumio Kishida said on Sunday he would nominate a new Bank of Japan governor next month.

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“I don’t mean to say the BOJ should raise interest rates one after another … but there’s room to make it more flexible,” Shirai said in the public broadcaster NHK’s debate program.

Shirai has previously stated that a review of the current stimulus is needed so the bank can adjust interest rates more flexibly.

The central bank dominates Japan’s bond markets by gobbling up massive amount of Japanese government bonds (JGBs) as part of its monetary stimulus.

“Instead of being the only one, the BOJ should allow various other investors to trade in the bond market, which will help it become resilient to shocks. If institutional investors receive return, it will revive Japan’s financial center,” she said.

Last month, the BOJ stunned markets by doubling the permitted band to 50 basis points either side of its 0% 10-year yield target. As a result, the 10-year yield cap is now set at 0.5% versus 0.25% previously.

Japan’s economy, the world’s third largest, will grow firmly this year, led by domestic consumption with solid capital expenditure and pent-up demand in the service sector, while external demand will slacken due to a global slowdown, she said. (Reporting by Tetsushi Kajimoto Editing by Shri Navaratnam)

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