Incoming Bank of Japan governor Kazuo Ueda said on Monday he has ideas on how Japan’s central bank could exit its massive monetary stimulus, but the shift to tighter policy will only happen as the country’s inflation trend picks up. significantly.
The central bank will scale back its bond purchases and is likely to move towards normalizing monetary policy when it comes within sight of reaching its 2% inflation target, Ueda said.
With inflation trending below the Bank of Japan’s target, however, the central bank is likely to stick to its current ultra-accommodative policy for now, he added.
“Major improvements need to be made in the Japanese inflation trend for the Bank of Japan to move into monetary tightening,” Ueda said.
“It’s not that I have no ideas on how to adjust the Bank of Japan’s current policy. But the desirable adjustment will vary depending on the economic changes at the moment,” Ueda said, adding that it is premature to comment on how the central bank might change. monetary policy. .
For now, the Bank of Japan’s ultra-lax conduct has been appropriate as the benefits of monetary policy, such as increased growth, outweigh the costs, such as deteriorating market functions, he said.
“If the inflation trend does not pick up, the Bank of Japan should shift to a more sustainable monetary policy or an easing monetary framework that addresses the cost of its stimulus,” Ueda said at a confirmation hearing in parliament.
Ueda said he sees no need now to change the 2% inflation target or central bank language in a joint statement signed by the government in 2013 obliging the central bank to hit its price target as soon as possible.
He also said that the Bank of Japan must watch out for an unwanted rise in inflation, delivering on its commitment to continue to increase money printing until inflation surpasses its 2% target.
Following parliamentary approval, Ueda will succeed incumbent President Haruhiko Kuroda, whose second five-year term as bank head ends on April 8.
Source: Terra
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