BOJ’s Amamiya signals future adjustment to easy policy
WELLINGTON: Bank of Japan Deputy Governor Masayoshi Amamiya said the central bank could adjust its ultraloose monetary policy in the future to address the rising cost of prolonged easing, the Asahi newspaper reported on Wednesday.
In an interview with the paper, Amamiya ruled out the possibility of a near-term exit from ultra-easy policy, saying that whittling down stimulus prematurely could push Japan back into deflation.
But he said the BOJ must carefully watch the rising cost of prolonged easing such as the damage of near-zero rates on bank profits, stressing that such demerits could accumulate.
Asked whether the BOJ could fine-tune its stimulus programme to address the demerits, Amamiya was quoted as saying: “An adjustment could happen if that’s necessary to stably achieve our price target. We shouldn’t rule this out.”
Despite five years of aggressive money printing, the BOJ has failed to achieve its elusive 2 percent inflation target as firms remain wary of raising wages and prices of their goods.
As the BOJ lags well behind its US and European counterparts in dialing back crisis-mode policies, some BOJ policymakers have openly warned of the rising cost of prolonged easing, such as the hit to bank profits.
Some analysts say the BOJ could raise its long-term rate target slightly and describe it as a “fune-tuning” of a still massive stimulus, to give banks room to profit from lending.
Amamiya said while the economy is making “steady progress” toward meeting the BOJ’s price goal, it has become clear that achieving the target was not easy and could take time.
“Instead of trying to change public perceptions with a shock blow, we should guide inflation toward our target through steady improvements in the output gap and inflation expectations,” Amamiya was quoted as saying.
He said the BOJ will look into why inflation, which stood at a meagre 0.7 percent in May, remains stubbornly low when it reviews its quarterly projections next month.
“We’ll scrutinise factors that are preventing inflation from accelerating. We’ll look very carefully into what is happening,” Amamiya told the paper.
The BOJ will conduct a quarterly review of its projections at a rate review in July, and in doing so could take into account structural factors that are weighing on inflation such as the spread of online shopping, analysts say.
In a separate interview with Bloomberg published on Wednesday, Amamiya said the BOJ is “very far off” an exit from ultra-loose policy with the benefits of its stimulus programme still exceeding the costs. — Reuters