Dec 19 (Reuters) - The Bank of Japan kept monetary settings steady on Thursday and maintained its upbeat view on the economy, suggesting policymakers are in no hurry to boost stimulus even as global risks threaten a fragile recovery.
The central bank, however, offered a gloomier view on factory output than at its previous rate review in October, a nod to the widening fallout from softening global demand and the U.S.-China trade war.
The decision to stand pat keeps Japan in line with the U.S. Federal Reserve and the European Central Bank, which have both signalled their respective monetary policies will be in a holding pattern for the time being.
Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:
ECONOMIC OUTLOOK “Japan’s economy continues to expand moderately, but inflation still hovers around 0.5%. Various risks cloud the outlook so we need to maintain our massive stimulus programme.”
GLOBAL ECONOMIC UNCERTAINTY “There are some positive movements in the global economy but uncertainty remains high. We need to continue to guard against downside risks to the economy.”
SINO-U.S. TARIFF WAR “It’s welcome news that the United States and China held off on slapping additional tariffs. Markets are taking this positively. It’s true that risk sentiment has improved. But there are still differences in views between the two countries, so we need to guard against risks.”
WHETHER DEEPENING RATES REMAINS AN OPTION IF THE BOJ WERE TO EASE “Yes, it remains a tool. But it’s not as if we can deepen negative rates indefinitely. There is some impact on financial institutions ... We need to carefully weigh the benefits and costs of any step we take.”
JAPAN GOVERNMENT BONDS “Not thinking of targeting shorter-maturity JGBs as long-term yield target now. I think Japan’s yield curve should steepen further ... Super-long yields should be higher.”
LOW RATES FOR PROLONGED PERIOD “If low rates are sustained for a prolonged period, that could hurt financial intermediation. We must make sure the (demerits) do not erode the effect of monetary easing.”
ON IMF’S PROPOSAL TO MAKE BOJ’S INFLATION TARGET MORE FLEXIBLE “We must stick to our 2% inflation target and make efforts to achieve it at the earliest date possible. There’s no change to our stance of patiently maintaining our bold stimulus programme.”
ON PLANS FOR SHORTER MATURITY FOR LONG-TERM YIELD TARGET “We don’t have any plans now to target a shorter maturity for our long-term yield target. I can’t say we would rule this out forever ... But we don’t plan to do this now, and don’t think this is appropriate.”
GOVERNMENT STIMULUS PACKAGE “It’s an appropriate step ... Coupled with our bold monetary easing under yield curve control, the policy mix will have a mutually reinforcing positive effect on the economy.” (Reporting by Leika Kihara, Editing by Sherry Jacob-Phillips)
Our Standards: The Thomson Reuters Trust Principles.