BOJ lays out key debating points on future exit from easy policy

Bank of Japan (BOJ) Governor Haruhiko Kuroda said any future debate on an exit from ultra-loose monetary policy will centre on the pace of increase in short-term interest rates and adjustments in the bank's massive balance sheet.

Kuroda brushed aside the chance of a near-term interest rate hike, stressing that the BOJ must continue to underpin a fragile economic recovery with loose monetary policy. But he said the BOJ can debate an exit strategy from its massive stimulus and head toward policy normalisation when achievement of its 2% inflation target, accompanied by wage increases, comes into sight.

"It's premature to lay out details of an exit strategy. But one major factor of debate will be the pace of increase in the BOJ's short-term policy rate, now set at -0.1%," Kuroda told parliament.

"Another factor would be how to adjust its balance sheet," he said, adding that most major central banks were moving ahead with rate hikes, before shifting toward a full-blow decrease in their balance sheets. Kuroda said wages are likely to increase ahead as companies respond to intensifying labour shortages and recent rises in living costs, though the outlook remained highly uncertain.