KOBE (Kyodo) The Bank of Japan will gradually adjust interest rates but is likely to maintain an accommodative monetary stance for the foreseeable future, BOJ Policy Board member Miyako Suda said Wednesday.
“The BOJ will probably adjust interest rate levels gradually in line with economic and price conditions,” Suda said in a speech to Kobe business leaders. “But chances are high that an accommodative monetary environment with extremely low interest rate levels will be maintained for the time being.”
Her remarks echo those made recently by BOJ Gov. Toshihiko Fukui and Deputy Gov. Toshiro Muto.
Suda said the timing for raising the unsecured overnight call money rate from the current 0.25 percent and the size of the increase will depend on economic and price conditions.
“We don’t have any preset idea about the level of a neutral interest rate or a timetable to realize the goal,” she said.
The BOJ scrapped its “zero-interest-rate” policy July 14, raising the overnight call rate to 0.25 percent from zero.
Referring to the hike of the official discount rate from 0.1 percent to 0.4 percent in the policy shift, Suda indicated there should be a wider gap between the key lending rate and the overnight call rate to help the money market work better.
The official discount rate, which the BOJ now prefers to call the basic loan rate, serves as the upper limit of the overnight call rate.
In the July 14 meeting of the nine Policy Board members, Suda proposed the BOJ raise the official discount rate to 0.5 percent from 0.1 percent, but the board decided to raise the rate to 0.4 percent by a majority vote.
Suda, a former professor of economics at Gakushuin University, said the economy is likely to continue to chalk up sustainable growth under price stability.
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