TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Friday he hopes to deepen debate with global policymakers on what role monetary policy can play in addressing climate change.
“There are many factors we need to take into account, such as how this will affect distribution of resources,” Kuroda told parliament, when asked by a lawmaker how the BOJ can help address climate change through monetary tools.
“We hope to deepen debate in international meetings. I’m not saying we won’t think about possibilities at all.”
Kuroda said that any decision the BOJ makes on climate change must be in line with its mandate of maintaining price and financial system stability.
With climate change posing a growing risk to financial stability, central banks are examining their own role in driving transformation.
The BOJ is wary of incorporating green concepts in monetary policy, but keen to take climate-related risks more into account in gauging the health of Japan’s banking system.
Kuroda defended his elusive 2% inflation goal, saying he saw no need to change it even as the hit to the economy from the COVID-19 pandemic pushes price growth further away from the target.
Consumer prices will keep falling for the time being due to the pandemic’s damage and the impact of past declines in crude oil prices, but start rising thereafter, he said.
“It will take time, but it’s still possible to achieve our 2% inflation target,” Kuroda said.
The BOJ conducted a review of its policy tools in March to make them more sustainable as years of heavy money printing failed to fire up inflation, forcing it to maintain a radical stimulus programme longer than expected.
Japan’s core consumer prices fell 0.4% in February from a year earlier, remaining distant from the BOJ’s target.
(Reporting by Leika Kihara; Editing by Chang-Ran Kim & Shri Navaratnam)
