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OECD: Bank of Japan will need to rethink policy

Staff Writer |
The Bank of Japan should rethink monetary policy if it can't meet its inflation target reasonably soon, or it could end up holding too much government debt, the Organisation for Economic Cooperation and Development (OECD) warned.

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The BOJ buys government debt to keep 10-year bond yields near zero, and it is likely to own more than half of all government bonds in the market by the end of 2019, the OECD said in its twice-yearly Economic Outlook Report.

Such large holdings could compromise financial stability and financial intermediation, the OECD warned in the report.

Japan's government debt has surpassed 220 percent of gross domestic product, which poses a serious risk and requires measures to control gains in social welfare spending, the OECD said.

"A rethinking of the monetary policy strategy would, however, be needed if the inflation target is not met for a prolonged time," the OECD said in the report.

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