TOKYO Bank of Japan Governor Haruhiko Kuroda said on Friday he had no plan to expand monetary stimulus now, blaming sharp declines in oil costs for keeping consumer inflation distant from the bank's ambitious 2 percent target.
While he maintained his optimistic view of the economy, Kuroda stressed his resolve to ease monetary policy further if risks threaten achievement of the BOJ's price target.
"The underlying price trend is improving steadily," Kuroda told parliament, expressing hope that record corporate revenues and a tightening labor market will gradually push up wages.
"I don't have plans for further monetary easing at the moment. But we're ready to adjust policy without hesitation if there is any change in the broad price trend," he added.
The remarks, made in response to a question by an opposition lawmaker, pushed down Japanese stocks on disappointment that no immediate monetary stimulus was forthcoming.
The BOJ is expected to cut its quarterly inflation forecasts and push back the timing for hitting its price target at a rate review on Jan. 28-29, as slumping energy costs weigh on price growth. Core consumer prices rose just 0.1 percent in the year to November.
Some market players speculate the BOJ may expand stimulus this month, though many analysts polled by Reuters expect the bank to wait until later this year.
Kuroda, a former head of the Asian Development Bank, offered a sanguine view on China's economy, saying that the world's second-largest economy will likely sustain stable growth as policymakers still have room to deploy more stimulus measures.
But he warned that recent falls in commodities prices were causing market disruptions, and could dampen Japanese corporate and household expectations that prices will rise ahead.
"Oil price falls are positive for Japan's economy as they boost corporate profits and households' disposable income," Kuroda said.
"But ... we're carefully watching how oil price falls could affect Japan's inflation expectations."
Kuroda has said the BOJ will look through the effect of oil price falls on inflation, and ease policy only if economic conditions worsen enough to discourage firms from boosting wages and capital expenditure.
Household and corporate inflation expectations have sagged, suggesting growing scepticism about the BOJ's ability to accelerate inflation with its huge money printing.
(Reporting by Leika Kihara; Editing by Chang-Ran Kim and Simon Cameron-Moore)