Fed’s fund rate hike won’t affect BOJ policy

The U.S. Federal Reserve Board’s decision to raise its Federal Fund rate by 0.25 percentage point will not directly affect Japan’s current easy monetary policy, the head of the Bank of Japan said Mar. 26.

BOJ Gov. Yasuo Matsushita told a news conference that he understands the FRB’s move to be an effort to achieve sustainable economic growth by nipping inflationary pressures. “(Monetary policy) should not be a reaction to every policy change of a foreign country. Our policy will be influenced by a comprehensive study of how such moves affect the nation’s economic situation as a whole,” he said.

He repeated his position that the central bank places importance on making sure the foundations of the current economic recovery become firmer, indicating that the key discount rate will remain at its record-low level of 0.5 percent.

Regarding the consumption tax, Matsushita said the short-term impact of the 2 percentage point hike beginning April 1 could be relatively mild. Some indicators show consumers are not rushing to spend ahead of the tax hike as they did before the spending levy’s introduction in 1989, which means the reactionary drop in spending after April will be smaller than initially thought, he said. While predicting that the nation’s external surplus will increase at a moderate pace due to such factors as the yen’s depreciation against the dollar, Matsushita said he does not foresee a return to the export-driven economy of the past because of such structural changes as increased overseas production lines.