Haruhiko Kuroda, Governor of the Bank of Japan, said on the 26th that he would not hesitate to take monetary easing measures in response to a downturn in economic activity and prices. He spoke at a question-and-answer session after a round-table conference co-hosted by four Osaka economic organizations.
Noting that sharp fluctuations in foreign exchange rates are negative and undesirable for the economy, he said he would continue to closely monitor developments in the financial and foreign exchange markets. In an earlier speech, he said, “By continuing monetary easing, we will firmly support Japan’s economy from the demand side, and support the formation of a virtuous cycle that accompanies wage increases.”
Deputy Governor Masayoshi Amemiya also said on the same day that the Bank will implement monetary easing to achieve the price stability target in a sustainable and stable manner, accompanied by wage increases. I gave a speech at the National Securities Convention held in Tokyo.
Other remarks by Governor Kuroda
- The rise in prices in Japan is due to high costs such as high resource costs and a weak yen
- Consumer prices will increase further toward the end of the year
- Consumer prices are expected to fall below 2% after the turn of the year
- The supply-demand gap will turn positive in the second half of this fiscal year and expand gradually
- Inflation expectations have risen in the long term as well as in the short term
- Future wage negotiations are expected to reflect past price increases
- Uncertainties surrounding the future, especially downside risks, are increasing
- U.S. and European central banks to raise interest rates, which may result in a stronger sense of a slowdown in the global economy
- The possibility of repeated waves of infectious diseases cannot be denied
- Fund-supplying operations against pooled collateral are the most versatile fund-supplying method
- Focusing on responding to a wide range of funding needs from COVID-19 operations, maintaining an easing environment
The Bank of Japan unanimously decided to maintain the status quo of monetary easing measures at its monetary policy meeting on the 22nd. At a press conference, Governor Kuroda said, “We will not raise interest rates for the time being,” in order to achieve stable and sustained increases in wages and prices. He explained that “for the time being” is “two or three years,” not months. The difference in monetary policy between Japan and the United States was once again recognized, and the yen depreciated to 1 dollar = 145.90 yen at one point, and the government and the Bank of Japan decided to intervene to buy the yen for the first time in 24 years.
The US Federal Reserve Board (FRB) decided to raise interest rates by 0.75 percentage points for the third consecutive meeting on the 21st. On the 22nd, the Swiss National Bank (central bank) also decided to raise interest rates by 0.75 percentage points, ending the negative interest rate policy. As major central banks in the United States and Europe accelerate their interest rate hikes to fight inflation, the Bank of Japan, the only one in the world to maintain negative interest rates, has become even more clear about its own policy of maintaining monetary easing measures.
Haruhiko Kuroda, Governor of the Bank of Japan
Photographer: Nishi Yoshitaka/The Yomiuri Shimbun/Bloomberg
(Updated to add Governor Kuroda’s remarks)