INTERNATIONAL Monetary Fund First Deputy Managing Director David Lipton welcomed the Bank of Japan’s new policy framework as a boost to its credibility, but called for more vigorous fiscal and structural policies to reflate a fragile economic recovery.

    Lipton also shrugged off the view that monetary policy was nearing its limit as a means to revive economies across the globe, stressing that central banks must be open to new ideas to help spur growth.

    “Central banks have to always be ready to do whatever they can based on the realities they face,” Lipton told Reuters on Saturday. “The BOJ has been an example of imaginative approaches.”

    The BOJ last month switched its policy target to interest rates from the pace of money printing, after years of massive asset purchases failed to jolt the economy out of stagnation.

    The increasingly radical monetary experiments by the BOJ are being closely watched by other global central banks which are also struggling to revive growth.

    Under a new “yield curve control” framework, the BOJ pledged to keep the 10-year bond yield around zero percent. It also maintained a 0.1 percent interest it charges on some excess reserves financial institutions park with the central bank.

    Some academics voiced doubts about whether the BOJ could control such a long end of the curve and whether it was feasible for a central bank to forcefully cap rates at a set level.

    Lipton said the IMF now believes that the BOJ’s yield curve control is “not just possible but a good idea.”

    (SD-Agencies)