Bank of Japan Gov. Haruhiko Kuroda said Thursday the central bank will continue "powerful" monetary easing as it does its part in revving up Japan's persistently low inflation, while keeping a close watch on the unorthodox policy's effects so it can be adjusted accordingly.
In determining the appropriate yield curve, or the difference between short-term and long-term interest rates, the BOJ will "assess the impact on the economy, prices and financial conditions," Kuroda said in a speech in Tokyo.
Under a policy framework adopted in September last year, the BOJ guides short-term rates at minus 0.1 percent and the yield on 10-year government bonds at around zero percent. Critics have argued that the bank's massive bond purchases are drying up liquidity and could make it difficult to keep down long-term rates.
But Kuroda dismissed such concerns, saying the program has been "conducted in a smooth manner thus far and the bank expects that the risk of having a problem in terms of continuing with its bond purchases will be small for the time being."
"I would like to re-emphasize that yield curve control is designed to be highly sustainable," he added.
While inflation remains far from the BOJ's 2 percent target, Kuroda said the policy has succeeded in "drastically improving" the economy, and he expects wage hikes to spur a "virtuous cycle" in which solid household spending allows businesses to raise prices, adding to corporate profits.
"Although, for the time being, it is likely that some firms will decide on a price rise while others will remain hesitant, firms' bullish stance to raise prices is expected to become predominant eventually."
Core consumer prices, excluding fresh food because of their volatility, rose a tepid 0.8 percent in October from a year earlier.