• Kyodo


Bank of Japan Gov. Haruhiko Kuroda has said the central bank “will not hesitate” on monetary easing if necessary, but noted that the Japanese economy’s moderate recovery means such action is not currently warranted.

Referring to the bank’s forecast that the economy will grow about 1 percent in fiscal 2016 and accelerate 1.5 percent in fiscal 2017, largely due to hefty fiscal stimulus, Kuroda on Saturday ruled out further easing for the time being.

“At this stage we don’t think it’s necessary to further reduce” the negative 0.1 percent rate on some reserves that commercial banks park at the BOJ, he said.

“But if it becomes necessary, we will not hesitate to reduce interest rates or expand the asset purchase program,” he said in a question-and-answer session after delivering a speech at the Brookings Institution think tank in Washington.

Asked whether the BOJ can lower the minus 0.1 percent rate to the level of the European Central Bank’s minus 0.4 percent deposit rate, Kuroda said that while it would be “technically possible,” he thinks the minus 0.1 percent is “appropriate” for now.

If the rate falls deeper into negative territory, it “could have a negative impact on the profitability of the financial system” or banking profits, although it “could have a stronger, positive impact on the real economy,” he said.

In his speech, Kuroda spoke of the BOJ’s shift in monetary policy to target interest rates instead of controlling the amount of assets it buys to flood the economy with cash as Japan seeks to tame deflation and nurture growth.

Last month, the BOJ introduced the so-called yield curve control policy by guiding the yield on 10-year government bonds to around zero percent while maintaining the minus 0.1 percent rate applied to some commercial bank deposits.

The central bank also announced it will keep expanding the monetary base until growth in the consumer price index excluding fresh food, a key gauge of inflation, “overshoots” its 2 percent target.

The BOJ chief played down suggestions by some scholars that central banks should raise their inflation targets from 2 percent to about 4 percent as a possible policy option to address declines in inflation expectations.

“Based on Japan’s experience, the argument that a central bank can lift inflation expectations of various economic entities simply by raising its inflation target seems a little naive to me,” he said.

Kuroda, a former president of the Asian Development Bank, also suggested Japan should accept more foreign workers to offset a decline in the nation’s population.

“The workforce in Japan is shrinking by about 1 million a year. This is a real problem,” he said. “Personally, I think we should allow many more foreign workers to come to Japan.”

Kuroda hailed a plan by the government to open the agriculture sector and in-home care services to foreign workers as part of efforts to revitalize regional economies.

Kuroda was in Washington for annual meetings of the International Monetary Fund and the World Bank.

In a time of both misinformation and too much information, quality journalism is more crucial than ever.
By subscribing, you can help us get the story right.