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Incoming BOJ chief says low rates remain appropriate - for now
While signaling the chance of tweaking the BOJ's bond yield curve control (YCC) in the future, Ueda said the bank needed to work out the right timing and means to do so, a sign the new chief will be in no rush to overhaul the controversial policy.
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A security officer patrols around the Bank of Japan (BoJ) headquarters in Tokyo on Feb. 14, 2023. (AFP/Yuichi Yamazaki)
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ncoming Bank of Japan (BOJ) Governor Kazuo Ueda said on Friday the central bank must maintain ultra-low interest rates to support the fragile economy, warning of the dangers of responding to cost-driven inflation with monetary tightening.
While signaling the chance of tweaking the BOJ's bond yield curve control (YCC) in the future, Ueda said the bank needed to work out the right timing and means to do so, a sign the new chief will be in no rush to overhaul the controversial policy.
Speaking to lawmakers, Ueda said the recent rise in inflation is driven largely by rising raw material import costs, rather than strong demand, adding the outlook for Japan's economy was highly uncertain.
Global bond yields fell and Japanese stocks rallied as Ueda's emphasis on patience and continuity in policy tempered some market expectation that he might seek to make a hasty exit from the extreme monetary stimulus of his dovish predecessor, Haruhiko Kuroda.
"It's standard practice to act preemptively to demand-driven inflation, but not respond immediately to supply-driven inflation," Ueda told a lower house confirmation hearing.
"Japan's trend inflation is likely to rise gradually. But it will take some time for inflation to sustainably and stably achieve the BOJ's 2 percent target," he said.
"It's true there are various side-effects emerging from the stimulus. But the BOJ's current policy is a necessary, appropriate means to achieve 2 percent inflation."
