Bank of Japan Governor Haruhiko Kuroda speaks at a news conference in Tokyo on Dec. 19, 2019. (Kim Kyung-Hoon/Reuters)
TOKYO -Bank of Japan Governor Haruhikokuroda warned Monday of “very high uncertainties” about the economy and reiterated the bank’s willingness to increase stimulus as necessary to support a fragile recovery.
These remarks strengthen market expectations that the BOJ will continue to be an exception in a worldwide wave of central banks raising their interest rates to fight soaring inflation.
“Uncertainty regarding Japan’s economy is very high” given risks such as the COVID-19 pandemic’s impact, Ukraine crisis, and rising commodity costs, Kuroda said, adding the BOJ was closely watching the impact currency moves may have on the economy.
“We will not hesitate to take further monetary easing measures as necessary,” Kuroda stated in speech at a quarterly meeting for the branch managers of the central bank.
Kuroda reiterated the BOJ’s policy guidance, that the bank expected short- and long-term target interest rates to move at “current or lower .”
In a Monday quarterly report, the BOJ increased its assessment of seven Japanese regions as consumers showed signs of recovering from the effects of the pandemic.
The yen fell against the dollar due to expectations that the BOJ would keep its monetary policy loose, increasing the gap between the aggressive rate-hike plan of the U.S Federal Reserve.
The dollar climbed to a 24-year high on the yen on Monday after Japan’s ruling coalition’s strong election result indicated no change to ultra-easy monetary policy.
Under its yield curve control policy, the BOJ pledges to keep short-term rates at -0.1 percent and the 10-year bond yield around 0 percent as part of efforts to fire up inflation to its 2 percent target.
While inflation surpassed 2 percent in May, largely due to rising fuel prices, Kuroda dismissed the possibility of a near term rate rise on the basis that such cost-push inflation would prove temporary unless it is accompanied with higher wages.
By Leika Kihara