Haruhiko Kuroda, governor of the Bank of Japan (BOJ), on the central bank’s headquarters in Tokyo, Japan, on Thursday, May 27, 2021.
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Japan’s outgoing central governor Haruhiko Kuroda defended the Bank of Japan’s ultra-dovish monetary policy stance at his final policy meeting on Friday.
The Bank of Japan left its negative rate of interest unchanged at -0.1%, widely in step with expectations – and reiterated the central bank’s goal to maintain the yield on the 10-year Japanese Government Bond (JGB) around 0%.
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The central bank has kept its benchmark rate of interest unchanged since 2016, when it implemented its yield curve control (YCC) policy, which seeks to defend its goal on JGBs by purchasing a vast amount of presidency bonds.
Kuroda was first appointed in March 2013. His current five-year term will end on April 8, and is about to get replaced by incoming BOJ chief Kazuo Ueda. /need to mention Ueda high up
Kuroda has led the central bank’s ultra-dovish monetary policy for the past decade – whilst global central banks in recent months raised rates of interest in a bid to tame inflation.
The BOJ shocked global markets in December when it widened its tolerance range to 50 basis points above and below its 0% goal — up from 25 basis points previously.
On Friday, the yield on 10-year Japanese government bonds fell to 0.441%, below the upper ceiling of the central bank’s tolerance range of fifty basis points above and below 0%. The Japanese yen weakened roughly 0.3% after the announcement and traded at 136.6 against the U.S. dollar.
“Japan’s economy, despite being affected by aspects similar to high commodity prices, has picked up because the resumption of economic activity has progressed,” Bank of Japan said in its policy statement on Friday, concluding the two-day meeting.
“Financial conditions have been accommodative on the entire, although weakness in firms’ financial positions has remained in some segments,” the central bank said.
Recent BOJ leadership
The parliament also approved Shinichi Uchida and Ryozo Himino as the subsequent Bank of Japan deputy governors, Kyodo said.
The central bank held off changes to its yield curve control policy and inflation goal, saying it can aim “to realize the worth stability goal of two percent, so long as it’s obligatory for maintaining that focus on in a stable manner.”
The Bank of Japan “will proceed expanding the monetary base until the year-on-year rate of increase within the observed CPI (all items less fresh food) exceeds 2 percent and stays above the goal in a stable manner,” it said in an announcement.
Japan’s consumer price index rose 4.2% in January — the best CPI reading in 41 years. The following report is due out on Feb. 24.
The central bank, nonetheless, ended its statement on an optimistic note, and said further growth lies ahead for the nation’s economy.
“Japan’s economy is prone to recuperate, with the impact of COVID-19 and supply-side constraints waning even though it is predicted to be under downward pressure stemming from high commodity prices and slowdowns in overseas economies,” the central bank said.
“Japan’s economy is projected to proceed growing at a pace above its potential growth rate,” it said.
