Bank of Japan Gov. Haruhiko Kuroda said Friday the bank has "ample space" for additional monetary easing, reminding the market that further stimulus is possible despite the central bank's decision to stand pat last month.
"There is no doubt that ample space for additional easing" remains in terms of quantity, quality and the interest rate, the BOJ chief said in a speech, pointing to moves in overseas economies as "the most important risk factor."
The yen rose sharply against the dollar and stocks slumped when the BOJ held off from further easing in late April, disappointing market players who had bet on more stimulus.
"The BOJ's monetary policy is intended for domestic purposes, especially to achieve the 2 percent inflation target," Kuroda said.
He said if currency and overseas economic developments throw up new hurdles to the inflation goal, he will pull the trigger "without hesitation."
As for the risks to Japan, Kuroda said that uncertainties remain, especially in emerging markets such as China, the Middle East and Brazil.
Uncertainties over the pace of the nascent interest rate hikes in the U.S. and the possibility of Britain leaving the European Union are also risks. These, he said, could discourage firms from investing in infrastructure and personnel.
"If these risks were to materialize, there is a possibility that firms' positive stance toward investing in physical and human capital might be restrained through the effects of business confidence," he said.