New Bank of Japan chief vows to keep stimulus, shuns premature tightening

WASHINGTON – Bank of Japan (BOJ)

governor Kazuo Ueda

said on Wednesday that the central bank must pay more attention to the risk of failing to meet its 2 per cent inflation target with premature monetary tightening, rather than being behind the curve in combating too-high price growth.

While other countries are experiencing elevated inflation, the situation is “quite different” in Japan, Mr Ueda said in Japan’s Group of Seven (G-7) chair briefing with Finance Minister Shunichi Suzuki.

“I do not deny it as a possibility,” Mr Ueda said, when asked by a reporter whether Japan could

risk being behind the curve

in addressing the risk of too-high inflation by keeping monetary policy ultra-loose for a prolonged period.

But the BOJ must pay “more attention to (the risk of) failing to achieve 2 per cent inflation” with a premature end to easy policy, rather than that of a delay in raising interest rates, said Mr Ueda, who is in Washington for his debut international meeting since assuming the post on Sunday.

Mr Ueda said he explained to his counterparts at the G-7 meeting that the BOJ will continue its monetary easing until its 2 per cent inflation target is met in a stable and sustainable fashion.

Japan remains an outlier among a global wave of central banks tightening monetary policy to combat soaring prices as the BOJ focuses on supporting a fragile economy until durable increases in inflation and wages come into sight.

Markets, however, have been simmering with speculation that the BOJ will phase out or end its controversial bond yield control policy under Mr Ueda, due to the rising side effects of prolonged easing such as the hit to bank profits.

Mr Ueda’s latest remarks, which follow reassurances he made on Monday to maintain yield curve control for now, suggest that the BOJ may not overhaul the policy at this month’s meeting.

At Wednesday’s briefing, Mr Ueda said G-7 policymakers have taken appropriate steps to prevent contagion from recent banking sector woes in the United States and Europe, although they need to be vigilant to “elevated uncertainties”.

“The Basel III (bank regulations) have not necessarily been implemented completely,” he said. “We need to make sure these regulations are fully implemented.” REUTERS