TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda said the central bank’s planned policy examination will seek to make its stimulus programme “nimble” to counter future shocks, such as the coronavirus crisis that has deepened the country’s recession.
Markets are looking for clues on what could come out of the BOJ’s plan, unveiled last week, to examine more effective ways to achieve its elusive 2% inflation target.
While the BOJ will not overhaul its yield curve control (YCC) policy, it will examine whether its operations, tools and asset purchases are working well, Kuroda said on Thursday.
“If there is anything more that can be done to make our policy more effective and sustainable, we’ll put it into place,” he told a meeting of business lobby Keidanren.
Simply maintaining YCC for a prolonged period is not enough, Kuroda said, stressing the examination will seek to address any rigidity that may have emerged from years of massive stimulus.
“As we’ve experienced with COVID-19, various shocks may occur in the future. It’s therefore necessary for us to be nimble and ready to respond effectively to possible changes in economic, price and financial conditions,” he said.
In a rare acknowledgement of the disadvantages of prolonged easing, Kuroda said the BOJ’s stimulus was not without costs such as market distortions caused by its huge asset buying and the hit to bank profits from ultra-low interest rates.
“Such costs or side-effects need to be minimised,” though that alone would not be enough, Kuroda said.
“We’ll take a forward-looking approach in seeking ways to achieve economic and price stability with more effective monetary easing, while mitigating the side-effects.”
The BOJ has said it will announce the findings of its examination in March.
(Reporting by Leika Kihara; Editing by Shri Navaratnam and Stephen Coates)