The Bank of Japan (BOJ) does not plan to change its massive stimulus program and will “immediately act” if risks to the economy undermine the momentum toward achieving its inflation target, central bank Governor Haruhiko Kuroda said yesterday.
While offering a sanguine view of the global economy, Kuroda warned of factors that could threaten the recovery, including geopolitical risks and the rising tide of protectionism.
“Particularly, what I’m concerned about are protectionist tendencies in some countries and geopolitical risks surrounding the world economy,” Kuroda told a Europlace financial forum.
“I sincerely hope that the multilateral trading system will be maintained in coming years,” he said.
US President Donald Trump’s “America First” approach has raised concerns among some policymakers in Asia, where many export-reliant economies including Japan benefit from free trade and advocate multilateral trade agreements.
Asked if he has become more worried about the demerits of an ultra-loose policy, Kuroda said the BOJ had not changed its message since revamping its policy framework in September last year, when it noted the yield curve had become “too flat” and was not good for the banking system.
“We have been able to maintain yield curve control quite effectively and efficiently without creating financial problems,” he said, adding that current levels of the BOJ’s yield targets were “quite appropriate.”
“We will continue our current extremely accommodative monetary policy to achieve the 2 percent inflation target as soon as possible,” the governor said.
The BOJ has been dropping subtle yet intentional hints that it could edge away from crisis-mode stimulus earlier than expected, sources have said.
Kuroda said that while geopolitical risks were “very difficult to predict,” the BOJ would be mindful of the possibility that they could threaten Japan’s economic recovery.
“If anything happens to undermine the momentum toward achieving our price stability target, we would immediately act in accordance to specific needs,” he said.
“At this stage, I’m not concerned about that,” since the global economic outlook is “fairly strong and robust,” he added.
The BOJ revamped its policy framework in September last year to one targeting interest rates from the pace of asset purchases after three years of heavy money printing failed to fire up inflation to its 2 percent target.
The BOJ now guides short-term interest rates at minus 0.1 percent and maintains the 10-year government bond yield at around zero percent.
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