Kuroda Denies Shift to Tightening Monetary Policy... "Not the First Step of Exit Strategy"

Haruhiko Kuroda, Governor of the Bank of Japan

[Asia Economy Reporter Lee Ji-eun] Haruhiko Kuroda, Governor of the Bank of Japan (BOJ), warned against the market interpretation that the expansion of long-term interest rate fluctuations is equivalent to a rate hike, stating that "we have not taken the first step toward an exit strategy (from the ultra-low interest rate policy)."

In a speech at the Japan Business Federation on the 26th, Governor Kuroda explained the change on the 20th from a long-term interest rate fluctuation range of ±0.25% to ±0.5%, saying, "This was a response made to continuously and smoothly implement monetary easing policies, considering the ripple effects on corporate financing."

Earlier, at a press conference held immediately after the monetary policy meeting, Governor Kuroda also emphasized again that "this decision was made to facilitate monetary easing and does not mean raising interest rates," clarifying that the monetary policy is not shifting to a tightening stance.

Furthermore, in his speech that day, he stated, "It is necessary to maintain monetary easing policies to firmly support the economy and create an environment where companies can raise wages."

However, despite Governor Kuroda's assertions, the market views the BOJ's decision as effectively a rate hike, given that the upper limit of long-term interest rates was raised to 0.5%.

Jiji Press analyzed that the sudden partial revision of policy by Governor Kuroda, who had so far maintained an accommodative monetary policy, was influenced by pressure from Japanese Prime Minister Fumio Kishida. The Kishida Cabinet, facing an economic crisis due to the Russia-Ukraine war and an unprecedented yen depreciation, was reportedly dissatisfied with the BOJ's monetary policy.

Jiji Press reported, "People close to the Prime Minister believe that Kishida contacted Governor Kuroda by phone regarding this monetary policy decision."

Accordingly, some speculate that the Kishida Cabinet will work with the next governor to reshape monetary policy when Governor Kuroda's term ends in April next year.

Jiji Press stated, "The Kishida Cabinet may review the joint statement between the BOJ and the government, which forms the foundation of Japan's monetary policy. However, if the Prime Minister modifies the monetary easing policy, he will likely need to persuade the conservative faction of the Liberal Democratic Party, which demands the continuity of Abenomics."

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