The Bank of Japan's decision to expand bond purchases and set a 1 percent inflation goal was a step too far that leaves it likely to finance government deficit spending, a former executive said.
"They looked like really desperate measures," Eiji Hirano, 61, who was a BOJ executive director in charge of international affairs from 2002 to 2006, said last week in Nagoya.
The yen weakened and stock prices rose in the world's third-largest economy after BOJ Gov. Masaaki Shirakawa and the Policy Board unexpectedly pledged on Feb. 14 to buy ¥10 trillion in government debt and set the inflation target. That market reaction creates the "illusion" that monetary policy alone can cure Japan's economic woes and may compel the BOJ to bolster bond purchases further and monetize public debt, Hirano said.