In light of the rising cost of prolonged monetary easing, a panel of academics and business executives urged the Bank of Japan (BOJ) to make its 2% inflation target a long-term goal rather than one that must be met as soon as possible.
The panel also recommended that interest rates rise more in line with economic fundamentals and that Japan's bond market function be normalised.
"The way the BOJ conducts monetary policy must be revamped," Yuri Okina, the panel's co-chair who is considered as among candidates to become the next BOJ deputy governor, told a news conference.
"By making 2 per cent inflation a long-term goal, the BOJ can make its monetary policy more flexible," she said.
The panel's proposal comes ahead of the BOJ's leadership transition, with Governor Haruhiko Kuroda's term ending in April and his two deputies' terms ending in March.
With core consumer inflation in Japan at a 41-year high of 4%, double the BOJ's target, markets are betting the central bank will soon begin to phase out its aggressive stimulus and bond yield caps.
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