BOJ 'open to further monetary easing'

Haruhiko Kuroda.
Haruhiko Kuroda.

TOKYO • Bank of Japan governor Haruhiko Kuroda stressed yesterday his readiness to expand monetary policy still further, saying that market moves would be key factors the central bank would examine in deciding when and how it might next expand stimulus.

Mr Kuroda maintained his optimism that Japan's economy was recovering moderately, despite last week's "tankan" survey that showed business mood souring on weak emerging market demand.

But he reiterated the BOJ's readiness to ease again if risks threatened prospects for accelerating inflation, now at a dead halt, towards its 2 per cent target. "For now, the effect of negative interest rates is very strong so we'd like to steadily proceed with this policy," Mr Kuroda told Parliament.

The BOJ would not hesitate to take action either by accelerating asset purchases, buying more risky assets or pushing interest rates deeper into negative territory, he said.

Nor would the BOJ pre-determine what steps it would take or how it could combine measures were it to ease again, he said, noting that the best move would depend largely on economic and price developments at the time. "We won't necessarily choose a rate cut just because it's easier to do so (than other policy means)."

Mr Kuroda said developments in financial markets, as well as in the economy and in prices, would be key factors for the BOJ when deciding whether, when and how it would expand stimulus.

"We need to take a comprehensive look at various factors in deciding (the best mix of steps) at the time including market moves, particularly those in Japan," he said.

The BOJ stunned markets in January by deciding to add negative interest rates to its massive asset-buying programme in a fresh attempt to reflate the economy out of the doldrums, but the move has failed to boost stock prices or arrest an unwelcome rise in the yen.

Japan's business sentiment worsened in the three months to March and companies' inflation expectations weakened, a quarterly BOJ tankan survey showed, keeping pressure on the central bank to do more.

Companies have been reluctant to boost capital expenditure and wages, clouding the outlook for the success of Premier Shinzo Abe's "Abenomics" stimulus policies.

Wages rose for the first time in four months in February but only by 0.4 per cent from a year earlier, data showed yesterday. Japan's economy shrank in the last quarter of last year.


A version of this article appeared in the print edition of The Straits Times on April 06, 2016, with the headline 'BOJ 'open to further monetary easing''. Print Edition | Subscribe