In his first speech after the announced of the Bank of Japan’s new monetary easing policy last week, BoJ Governor Haruhiko Kuroda said that the central bank stood ready to use every available tool to achieve its 2% inflation target.
His key points in a speech on Monday to business leaders in Osaka, western Japan were: “There is no better opportunity than now to completely get out of deflation. Talking about the limits of monetary policy does not help at all. […]There is no limit to monetary policy. In designing monetary policy, the BoJ will relentlessly pursue innovation and never hesitate to challenge.”
The BoJ would be careful of the impact of an ultra-easy policy could have on banks’ profits, but that obviously would not prevent the bank from expanding stimulus further if needed to revive Japan’s economy after years of massive money printing failed to jolt the economy out of decades-long stagnation.
Kuroda also said that under the new framework, the BoJ’s main means for monetary easing would be to deepen negative interest rates from the current -0.1%, or lowers its 10-year government bond yield target, now set at around zero percent. The pace of the BOJ’s bond purchases could fluctuate depending on how much the central bank needed to buy to achieve its yield curve target. But such changes in the maount of bond purchases would have no policy implications, he added, putting water to the fire that the BoJ was eyeing a future tapering of asset purchases.
IMF Comments On The New Framework
On Monday, the International Monetary Fund said that a new monetary policy framework adopted by the BoJ marked progress. Despite this, the IMF still stuck to its stand that the central bank wouldn’t be able to hit its ambitious 2% inflation goal in the near future.
IMF Japan mission chief Luc Everaert made the comment after the central bank announced its new framework last week, at a seminar in Tokyo. He also said that the BoJ’s decision has removed a strict time horizon of achieving the inflation target, adding that, “We think that what happened on Sept. 21 is a good thing and welcomed that very much.” However, he emphasized that the new framework is a progress but that does not mean that the inflation target is going to be achieved much sooner than it otherwise would have.
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