Bank of Japan (BOJ) Governor Haruhiko Kuroda said he will not hesitate to boost monetary stimulus if needed, reiterating a pledge during an annual policy retreat in Jackson Hole, Wyoming, at which central bankers stressed their need for backup from fiscal policy.
“There is no doubt that there is ample space for additional easing in each of the three dimensions,” Kuroda said on Saturday, referring to the BOJ’s package of asset buying, monetary base guidance and negative interest rates.
“The bank will carefully consider how to make the best use of the policy scheme in order to achieve the price stability target,” he told the Federal Reserve Bank of Kansas City’s symposium.
Photo: Bloomberg
Central bankers, struggling to spur persistently disappointing growth, gathered in Grand Teton National Park to debate how best to tackle low inflation despite having already cut interest rates to near zero or, in some cases, below zero.
They heard US Federal Reserve Chair Janet Yellen on Friday describe future potential options to jump-start the economy, while saying that the case for a US rate hike had strengthened.
Yellen said the Fed thinks it is close to meeting its goals of maximum employment and stable prices, and she described consumer spending as “solid,” while noting business investment was weak and exports had been hurt by a strong US dollar.
Even though the BOJ is engaged in a review of its monetary policy settings, due for completion next month, Kuroda’s comments underline his stance that the exercise will not mean any reduction in stimulus, despite growing doubts about its effectiveness.
“One of the key elements of our policy is to push up inflation expectations to our price stability target and anchor them there,” Kuroda said. “The Bank of Japan will continue to carefully examine risks to activity and prices at each monetary policy meeting, and take additional monetary policy measures without hesitation.”
The US central bank’s next policy meeting is scheduled for Sept. 20 and Sept. 21, while the BOJ is due to announced the results of its comprehensive review and decide policy at a meeting on Sept. 20.
European Central Bank (ECB) Executive Board member Benoit Coeure said during the same panel that his institution might also have to take further monetary measures if governments do not act to boost long-term growth.
“We will fulfill the price stability mandate given to us,” Coeure said. “But if other actors do not take the necessary measures in their policy domains, we may need to dive deeper into our operational framework and strategy to do so.”
While slowing growth and inflation present difficulties for central banks around the industrialized world, the Frankfurt-based ECB has particular cause to urge pro-expansion measures by the 19 nations that use the euro.
High unemployment, political spats and banking systems loaded with soured loans are hampering the region’s recovery from a debt crisis that started six years ago.
Meanwhile, Yellen’s statement will create some volatility for financial markets over the next three months, Raymond Yeung (楊宇霆), chief economist at ANZ Banking Group Ltd in Hong Kong, said by telephone on Saturday. “The cost of the US funding will increase, and Asian currencies will be under downward pressure.”
Still, some Asian nations would be willing to sacrifice capital outflows in exchange for the boost in export competitiveness that a weaker currency would provide, Yeung said.
“A rate move in the short term may not be that welcome by the equities side, but from a global growth perspective, it does anchor US as the engine of growth,” said Song Seng Wun (宋城煥), an economist at CIMB Private Banking in Singapore. “A stronger US would be beneficial for global confidence and in turn for export-oriented economies like Singapore and other Asian economies.”
Additional reporting by Reuters
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