The Bank of Japan will keep buying government bonds in the same amount and at the same frequency for some time, but economic "uncertainty" necessitates flexibility in setting interest rates, acting BOJ Gov. Masaaki Shirakawa said Tuesday.
Shirakawa told lawmakers in Tokyo that the purpose of the bond purchases — ¥1.2 trillion in government debt every month — is not to support fiscal policy.
Shirakawa became acting governor last week after the opposition-controlled Upper House rejected the government's two choices for the post, saying their backgrounds at the Finance Ministry compromised the principle that fiscal and monetary policy need to be kept separate.
"Uncertainty" in the economy persists and global financial markets are volatile, requiring the bank to remain flexible when setting its interest-rate policy, Shirakawa said. "We will manage policy in a flexible way."
When asked about the yen's recent surge against the dollar, he said: "Recent turmoil in global financial markets that stemmed from the U.S. subprime issue have been causing large fluctuations in currency markets," adding that developments in the foreign-exchange market need to be watched closely.
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