Kuroda defends the BOJ’s ultra dovish stance in his latest policy meeting
- Current Governor Kuroda was first appointed in March 2013 and has led the central bank’s ultra-tight monetary policy since 2016.
- Japan’s upper house of parliament approved nominee Kazuo Ueda to become the next governor to lead the central bank, succeeding Kuroda, Kyodo reported.
- “Japan’s economy, despite being affected by factors such as high commodity prices, has picked up as the resumption of economic activity has come,”[ads1]; the Bank of Japan said in its policy statement.
Haruhiko Kuroda, Governor of the Bank of Japan (BOJ), at the central bank’s headquarters in Tokyo, Japan, Thursday, May 27, 2021.
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Outgoing Bank of Japan Governor Haruhiko Kuroda defended the Bank of Japan’s ultra-dovish monetary policy stance at its latest policy meeting on Friday.
The Bank of Japan left its negative interest rate unchanged at -0.1%, broadly in line with expectations – and reiterated the central bank’s aim to keep the yield on the 10-year Japanese government bond (JGB) around 0%.
The central bank has kept its benchmark interest rate unchanged since 2016, when it implemented its yield curve control (YCC) policy, which attempts to defend its target on JGBs by buying an unlimited number of government bonds.
Kuroda was first appointed in March 2013. His current five-year term ends on April 8, and is set to be replaced by incoming BOJ chief Kazuo Ueda.
Kuroda has led the central bank’s ultra-tight monetary policy for the past decade – even as global central banks have raised interest rates in recent months in an attempt to curb inflation.
The BOJ shocked global markets in December when it widened the tolerance range to 50 basis points above and below the 0% target – up from 25 basis points previously.
On Friday, the yield on 10-year Japanese government bonds fell to 0.441%, below the upper ceiling of the central bank’s tolerance range of 50 basis points above and below 0%. The Japanese yen weakened about 0.3% after the announcement, trading at 136.6 against the US dollar.
“Japan’s economy, despite being affected by factors such as high commodity prices, has picked up as the resumption of economic activity has taken hold,” the Bank of Japan said in its policy statement on Friday, ending the two-day meeting.
“The financial conditions have been accommodating on the whole, although the weakness in the companies’ financial positions has continued in some segments,” the central bank said.
Japan’s upper house of parliament approved Ueda as the next central bank governor, Kyodo reported. This lays the groundwork for the Japanese government to formally appoint Ueda after the lower house’s approval on Thursday.
Parliament also approved Shinichi Uchida and Ryozo Himino as the next deputy governors of the Bank of Japan, Kyodo said.
The central bank held back policy changes on yield curve control and the inflation target, saying it would aim “to achieve the price stability target of 2 percent, for as long as necessary to maintain this target in a stable manner.”
The Bank of Japan “will continue to expand the monetary base until the year-on-year increase in the observed CPI (all goods minus fresh food) exceeds 2 percent and remains above target in a stable manner,” it said in a statement.
Japan’s consumer price index rose 4.2% in January – the highest CPI reading in 41 years. The next report is due on 24 February.
However, the central bank ended its statement on an optimistic note, saying that further growth lies ahead for the country’s economy.
“Japan’s economy is likely to recover, with the impact of COVID-19 and supply-side constraints easing, although it is expected to be under downward pressure from high commodity prices and slowdowns in foreign economies,” the central bank said.
“Japan’s economy is projected to continue growing at a pace above its potential growth rate,” it said.