Kuroda, Governor of the Bank of Japan, Says "Too Early to Shift to Tightening Monetary Policy"

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[Asia Economy Reporter Lee Ji-eun] Haruhiko Kuroda, Governor of the Bank of Japan (BOJ), drew a line on the possibility of a shift in monetary policy, stating that "it is still too early to consider an exit strategy from the ultra-low interest rate policy."

On the 20th, Governor Kuroda held a press conference and said regarding Japan's monetary policy direction, "It is difficult to think about modifying the quantitative easing policy immediately."

On the same day, the BOJ raised the allowable fluctuation range of long-term interest rates under the Yield Curve Control (YCC) policy from the previous ±0.25% to ±0.5%. The Nihon Keizai Shimbun explained that this is effectively equivalent to a rate hike, as the upper limit of long-term interest rates is raised to 0.5%.

However, the BOJ did not completely shift its monetary policy toward tightening. The short-term interest rate was maintained at minus 0.1% as before, and the measure to purchase index-linked Exchange-Traded Funds (ETFs) to increase the money supply in the market was also continued.

Governor Kuroda emphasized again that this decision was made "to facilitate monetary easing and not to raise interest rates," and that it does not represent a shift to a tightening monetary policy. He stated that it was merely a measure to resolve uncertainties in the financial market caused by the Russia-Ukraine war and the Federal Reserve's interest rate hikes.

When asked whether he intended to reconsider the accommodative monetary policy, Governor Kuroda said, "It is still premature to make a concrete decision," but indicated that he would maintain the current stance by adding, "It is difficult to think about modifying the quantitative easing policy for the time being." He also gave a positive evaluation of Japan's large-scale monetary easing policy over the past 10 years, saying that "the effects have outweighed the side effects."

Regarding the BOJ's decision to expand the fluctuation range of long-term interest rates, he stated, "I do not think there is a need to expand it further."

Meanwhile, Nihon Keizai Shimbun positively evaluated the BOJ's decision, saying, "Since the BOJ has expressed a negative stance on modifying accommodative monetary policy this year, the market is surprised by this response," and added, "With a partial modification of monetary policy, the narrowing of the US-Japan interest rate gap is expected to have the effect of curbing a sharp rise in the exchange rate."

This content was produced with the assistance of AI translation services.