The Bank of Japan held off on expanding stimulus on Tuesday despite once again pushing back the timing for hitting its inflation target, signaling that it will keep policy unchanged unless a severe shock threatens to derail a fragile economic recovery.
Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:
INFLATION TARGET
“Medium- to long-term inflation expectations remained weak, which is one of the reasons behind the delay (in the timeframe for achieving the price target).”
“We didn’t take additional monetary easing action despite delaying the projected timing for hitting our (inflation) target. But in the past, we didn’t necessarily ease each time we pushed back the timeframe. There were times we eased even though we didn’t push back the timeframe. The two don’t necessarily directly link. We adjust policy with the sole purpose of maintaining the momentum for achieving 2% inflation, with an eye on economic and price developments.”
“There’s no special relation between (the end of) my tenure and the timing for achieving 2% inflation.”
“European and U.S. central banks are also seeing the timeframe being pushed back, mainly due to very big falls in oil prices.”
“The BOJ has decided to achieve 2% inflation at the earliest date possible and made that pledge in a joint statement with the government (in 2013). We need to deploy all available means to achieve the price target. We’ll do whatever it takes to achieve 2% inflation at the earliest date possible.”
U.S. ELECTIONS
“The outcome of the election will affect not just the U.S. economy but would have important implications for the global economy, given the U.S. economy is the world’s biggest economy. Global financial markets are thus keenly watching the outcome. The BOJ will also carefully watch market and global economic developments, including how they will be affected by the election outcome.”
BOND YIELD CURVE
“I don’t see anything strange about the current formation of the yield curve.”
“It is not good for the economy if the yield curve flattens too much … by achieving an ideal yield curve through the YCC, we can provide a big, positive impact on the economy.”
FISCAL POLICY
“If fiscal policy stimulates economic activity, narrows the output gap and pushes down the jobless rate, that could quicken achievement of 2% inflation. It’s possible for fiscal policy to enhance the effect of monetary policy. Monetary policy could also enhance the effect of fiscal policy. They can mutually reinforce each other.”
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BUDGET BALANCE AND ECONOMIC GROWTH
“The government is making various efforts toward achieving its primary budget balance target for fiscal year 2020. There is still a gap (to achieving this target), according to figures from the Cabinet Office. The government needs to make even more efforts toward achieving this.”
“For the economy to achieve sustainable, appropriate growth, we need fiscal and structural policies as well as monetary policy … Still, central banks are basically responsible for achieving their price targets.”
DEFLATION
“I absolutely don’t think deflation is a good thing because when an economy is in deflation, wages won’t rise and the economy will shrink. But it’s true that it’s taking a significant amount of time to eradicate the deflationary mindset that beset the economy during 15 years of deflation.”
