The Bank of Japan may abandon its 10-year bond yield cap as early as next year on growing prospects that inflation and wages will overshoot expectations, said Takeo Hoshi, an academic with close ties to incumbent central bank policymakers.
The BOJ must maintain an ultraloose policy for the time being to convince the public that it is serious about reflating the economy long enough to generate sustained inflation, said Hoshi, an economics professor at the University of Tokyo.
But the central bank must also guard against the risk of inflation well exceeding its expectations, as intensifying labor shortages lift wages not just for part-time but permanent workers, he said in a recent interview.