Comments by BOJ Governor Kuroda at press conference

Oct 28 (Reuters) – The Bank of Japan maintained ultra-low interest rates on Friday and maintained its dovish outlook, cementing its status as an outlier among global central banks tightening monetary policy as recession fears weighed on prospects for a solid recovery dampen

As widely expected, the BOJ left its target of -0.1% for short-term interest rates and the promise to guide the 10-year bond yield around 0% unchanged. Continue reading

The following are excerpts of BOJ Governor Haruhiko Kuroda’s comments at his post-meeting press conference, held in Japanese, translated by Reuters:

YEN WEAKNESS

“It is extremely important that exchange rate movements reflect economic and financial fundamentals. The recent sharp, one-sided decline in the yen increases uncertainty for Japanese companies and is therefore bad for the economy.”

FACTORS TO OBSERVE

“There are various uncertainties that could push prices either up or down, such as the outlook for wages and corporate pricing behavior. We need to examine these factors closely.”

WAGES

“We expect wages to rise gradually, reflecting recent inflation. But we don’t just want to look at the numbers, we also want to look at the mechanism by which wages and prices move.

INFLATION

“Right now we don’t expect inflation to be stable and sustainable towards the 2% target in the next fiscal year.”

JAPANESE ECONOMY

“I don’t see the weak yen as a big opportunity for Japan’s economy. The weak yen is driving up the cost of importing commodities, thereby driving up consumer inflation. Such price increases are not the kind of inflation we are aiming for they are not accompanied by wage increases.”

BOJ’S INFLATION FORECAST UPGRADE

“The possibility that inflation will coincide with wage increases is increasingly weighted. It is true that we are approaching stable and sustainable inflation at 2%. But we are not there yet.”

EFFECTS OF THE GLOBAL ECONOMIC SLOWDOWN

“It is true that slowing overseas growth could weigh on exports and manufacturing. But exports and manufacturing are likely to remain strong as supply constraints ease… Even with the impact of the overseas slowdown, Japan’s economy is likely to recover.”

JAPAN’S NEUTRAL COURSE

“It’s hard to say because it depends on Japan’s potential growth rate. But what we can say is that Japan’s current interest rate level is below the neutral rate. That in turn stimulates the economy.”

EXIT STRATEGY

“We have no plans to raise interest rates or seek an exit (from loose policy) any time soon. But of course, if reaching 2% inflation comes on the horizon, the board will be debating an exit policy. When that happens, it is very important to communicate the BOJ’s intentions to the markets. The exit strategy must of course be clearly communicated to the markets and the public. At the moment, I don’t think we see inflation reaching our 2% target in a stable and sustainable manner. “

Reporting by Leika Kihara; Edited by Sherry Jacob Phillips

Our standards: The Thomson Reuters Trust Principles.

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