WASHINGTON (Reuters) -International Monetary Fund Managing Director Kristalina Georgieva on Thursday said the Bank of Japan was conducting an appropriate review of its monetary policy stance, but should keep policy accommodative because the country faces low inflationary pressures.
Georgieva told reporters that an adjustment to the central bank's debt yield curve control regime was not driven by an increase in inflation, which remains very close to the bank's 2% target.
"BOJ rightly pursued accommodative policy. The pressure from labor on increases in labor compensation has not led to any dramatic change. In other words, there is no driver for inflation from there," Georgieva said.
The Bank of Japan shocked markets in late December with a surprise tweak to its bond yield controls that allowed long-term interest rates to rise more than expected.
At the time, BOJ Governor Haruhiko Kuroda said the move was aimed at prompting increased bond purchases and was a fine-tuning of the central bank's ultra-loose monetary policy rather than a withdrawal of stimulus.
Georgieva said it was appropriate for the central bank to take a cautious approach to its monetary policy.
"They are doing the right thing to keep an open mind into the situation, but they are not - BOJ is not - faced with a sharp increase in inflation or drivers of inflation," she added.