Dec 20 (Reuters) - The Bank of Japan kept monetary policy steady and took a more upbeat view of the economy on Tuesday, reinforcing market expectations that its future policy direction could be an increase - not a cut - in interest rates.
Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:
“In general, a weak yen directly pushes up prices through a rise in import costs. In the long run, it also affects prices indirectly through (a narrowing of the) output gap and inflation expectations.
We will reflect these market developments and their impact on the economy and price outlook at our next policy meeting. They will be taken into account in our semi-annual outlook report in January.”
PROSPECTS FOR SLOWING PURCHASES OF EXCHANGE-TRADED FUNDS
“The BOJ’s ETF buying is part of its QQE framework and helps to push down risk premium. It’s not aimed at manipulating stock prices to a particular level. Our ETF buying is a necessary step to achieve 2 percent inflation ... As for the outlook, we will take an appropriate action by looking at economic, price and financial developments.”
“We would look at moves in stock markets, overall moves in financial markets, and moves in the economy and inflation at that point in time. We would consider such things under the overall framework of QQE with yield curve control.
“It’s true we have upgraded our assessment of Japan’s economy by a notch, and such things may be reflected in stock prices, but at this point it is not appropriate to slow our purchases of ETFs.”
ON TALK BOJ MAY RAISE 10-YEAR BOND YIELD TARGET
“We are still distant from our 2 percent inflation target. It’s therefore appropriate to continue with powerful monetary easing.”
“It’s absolutely not the case that Japanese government bond yields are allowed to rise in tandem with overseas long-term interest rates, or that (any such rise in Japanese yields) would prompt us to raise our yield targets.”
“Monetary policy doesn’t target currency rates ... Having said that, current exchange-rate moves can be described more as dollar strengthening rather than yen weakening. Almost every country’s currency is weakening against the dollar”
“It’s possible the divergence in monetary policy directions could affect currency moves. But for now, I don’t see current yen falls as excessive or posing any problem. Current (yen) levels are around the same levels seen in February. They aren’t too surprising a level.”
“It’s not a cap and only a policy target to guide (the 10-year bond yield) around zero percent ... We don’t have any (preset) idea that yields should not rise above a certain level or fall below a certain level.
“It’s not as if 10-year JGB yields must be fixed rigidly at zero percent. It’s also not the case that the yields must not exceed 0.1 percent or that they are allowed to do so. I think such debate isn’t substantial.”
FISCAL DISCIPLINE, BOND-BUYING
“Fiscal discipline is very important. This is not something the central bank controls but something the parliament and government decide, take responsibility, and hold power over. It is the foundation of democracy.”
“We slightly increased the amount of super-long JGBs we purchase but this was done in accordance with the policy, decided at the BOJ policy meetings, to achieve an appropriate yield curve ... In order to achieve an appropriate yield curve, we will conduct this operation as needed in accordance with policies decided by the (BOJ’s) policy board meetings\
ON EXITING FROM ULTRA-LOOSE POLICY
“How we actually execute an exit depends on inflation and financial situations at that time. It is not appropriate to discuss in detail now exit plans as this may confuse markets. We will debate (exit plans) at an appropriate time.
“My term will be up in April 2018. I cannot say now whether or not we will discus exit plans beforehand. There’s a possibility we will debate it, and there’s a possibility we will not.”
Reporting by Leika Kihara, Stanley White, Tetsushi Kajimoto and Minami Funakoshi; Editing by Shri Navaratnam