July 29, 2016 / 6:45 AM / 3 years ago

HIGHLIGHTS-BOJ Governor Kuroda's comments at news conference

TOKYO, July 29 (Reuters) - The Bank of Japan expanded stimulus on Friday by doubling purchases of exchange-traded funds (ETF), yielding to pressure from the government for action, but disappointing investors who had set their hearts on more audacious measures.

Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:


“Japan’s economy may see the pace of recovery slow for a while due to some weakness in exports and output. But it is then expected to continue expanding above its potential growth rate and expand moderately as a trend, with rising income driving spending among companies and households.”


“Negative interest rates are being accepted by markets and functioning properly. The effect of the rate cut (in January) is very large, and is already being felt in markets and the real economy. As seen in the experience in Europe, there is more room to cut rates deeper into negative territory.”


“The BOJ holds one-third of JGBs in the market but that means we still have two-thirds left to buy. I absolutely don’t think we are reaching the limits of JGB buying.”

“I don’t think we’ve reached the limits both in terms of rate cuts and JGB buying.”


“We’ve decided to conduct a comprehensive assessment of our policy with half a year having passed (since the adoption of negative interest rates). This is what all the board members thought would be desirable ... Whether that will affect monetary policy decisions will depend on what the outcome of the assessment will be. The purpose of this assessment is to examine what’s necessary to achieve our 2 percent price target.

“We adopted QQE three years and three months ago and expanded it in 2014 ... But it’s true we have not been able to achieve 2 percent inflation yet. We will of course consider what to do in terms of monetary policy steps, based on the outcome of our comprehensive assessment.”

“The effect of our monetary easing steps has been felt quite broadly on the economy, but not necessarily as much on prices. That’s why we need to conduct this comprehensive assessment.

“Our comprehensive assessment will include scrutinising how the flattening of the yield curve affects financial institutions’ profits.”

“When we say the ‘drip-feed’ approach of policy action is inappropriate, we’re talking about the importance of taking necessary and sufficient steps at the time. It’s undesirable to hold off on taking necessary, sufficient steps and being forced into responding to deterioration (in the economy) later.”

Asked whether the BOJ was pre-announcing monetary easing at its next meeting by announcing its plan to conduct a comprehensive assessment: “We’re not announcing this based on an assumption that we will do something on monetary policy. I am aware some central banks do pre-announce monetary easing. We don’t do such a thing.”


“I haven’t felt any pressure (from the government). But as written in the BOJ law, monetary policy is part of broader economic policymaking ... Just because we rule out incrementalism, that doesn’t mean we will deploy all of our steps every time we ease.

“At times we may use all three dimensions of easing and other times we may not do so. What’s important is to take sufficient and necessary steps at the time.”


“We have absolutely no plan to monetise government debt. We’re taking sufficient and necessary steps solely for the purpose of achieving our price target.”


“Advanced economies, including Japan, do not conduct monetary and fiscal policies as a set. Such an idea, which includes direct debt underwriting by central banks, is prohibited by law. But when fiscal stimulus is expanded at a time the central bank is maintaining ultra-loose monetary policy to achieve its price target, it enhances the boost to the economy.”

“Such a policy mix ... isn’t the central bank helping fund government spending. It’s different from helicopter money.” (Compiled by Leika Kihara and Kim Coghill)

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