The Bank of Japan’s governor reiterated that monetary stimulus will not be wound down until the inflation target is reached.
Haruhiko Kuroda dismissed the chance that the regulator can start an exit from the ultra-loose monetary easing policy earlier than expected. According to Kuroda, the Bank of Japan has all the necessary tools for the gradual withdrawal from the program. The central bank’s policy board is considering all scenarios of how the winding-down can affect the BOJ’s balance sheet.
The central bank will have to gradually withdraw from the quantitative easing program so that not to trigger a jump in long-term interest rates or turmoil in the financial markets, the BOJ governor said.
“We have absolutely no plan of doing so now,” Kuroda said, when asked whether the BOJ would plan any moves to wind down monetary policy before inflation hits its target.
Kuroda rattled markets last week by flagging for the first time the possibility of a stimulus exit if 2% inflation were met in fiscal 2019, a remark he later tempered.
Currently, the level of inflation in Japan remains far from 2%. Many national companies do not raise prices and wages due to economic uncertainty. At the same time, the Bank of Japan's exchange rate is at odds with other central banks, which are moving toward normalizing monetary policy after years of stimulus.
