Global central banks talk tough new reality in Tokyo

It’s Japan's version of the Fed's Jackson Hole symposium, without the trail hikes or views, and this year’s gathering of global central bankers in Tokyo will focus on two uncomfortable realities: flagging economic growth and sticky inflation.

- LEIKA KIHARA

The Bank of Japan (BoJ) and its affiliated think tank host a two-day annual conference that kicks off today and includes prominent US, European and Asian academics and central bankers.

While most of the speeches are academic in nature and closed to media, this year’s theme looks at “New challenges for monetary policy”, specifically how central banks should deal with persistent inflation, downside economic risks, volatile markets and US tariffs.

Those conflicting headwinds, much of it a result of US President Donald Trump's policies, are creating speed-bumps for many central banks, regardless of whether they are raising and cutting interest rates.

The BoJ, for example, remains on track to continue raising interest rates and steadily taper its bond purchases, a stark contrast to its rate cutting peers, but recent global developments have raised questions about the pace of such moves.

"While the BoJ may be forced to stand pat for a while, it doesn’t need to ditch rate hikes altogether," said former BoJ official Nobuyasu Atago. "It just needs to communicate in a way that when the environment looks right, it can resume rate hikes."