KAGOSHIMA, JAPAN – Bank of Japan Deputy Gov. Masayoshi Amamiya said Thursday the central bank is prepared to take additional monetary easing measures as a precaution, if necessary, after the U.S. Federal Reserve cut its interest rates the previous day.
The U.S. central bank on Wednesday lowered the federal funds rate for the first time since December 2008 by 0.25 percentage point, meaning the cost of some borrowing will now float somewhere between 2 percent to 2.25 percent. The Fed cited uncertainties over the global economic outlook amid trade tensions with China as reasons for the cut.
“The bank is no different from other major central banks, in that it is prepared to take, if necessary, policy responses in order to prevent the risks from materializing, while closely monitoring them,” Amamiya said in a speech to business leaders in Kagoshima.
He also said the Fed rate cut was “intended to prevent an actual slowdown in economic activity and inflation” and will likely have a positive influence on the Japanese economy.
“If the U.S. economy becomes more resilient, positive effects are likely to be exerted on the global economy and in turn Japan’s economy,” he said.
Major central banks around the world are poised to take additional monetary easing measures amid concerns over a cloudy global economic outlook and underlying low inflation.
BOJ Gov. Haruhiko Kuroda reiterated Tuesday his commitment to addressing the country’s prolonged low inflation, saying at a news conference that the bank is “rather positive” about taking additional easing steps if momentum toward its 2 percent inflation target is lost.
At the end of its two-day policy meeting on Tuesday, the BOJ maintained its short-term interest rate target at minus 0.1 percent as well as a plan to purchase Japanese government bonds at a pace that guides the 10-year yield to around zero percent.
As for the Japanese economy, Amamiya said it has been on a moderate expanding trend with business fixed investment expected to continue growing firmly in fiscal 2019 through next March.
But he also expressed concern over remaining uncertainties globally, such as the slowing Chinese economy and the U.K.’s planned exit plan from the European Union.
“The bank will carefully monitor whether overseas economies pick up during the time when domestic demand … is maintained firmly,” he said.