BOJ's Kuroda says no immediate need to overhaul policy framework

FILE PHOTO: Bank of Japan Governor Haruhiko Kuroda wearing a protective face mask attends a news conference as the spread of the coronavirus disease (COVID-19) continues in Tokyo, Japan, April 27, 2020, in this photo released by Kyodo. Mandatory credit Kyodo/via REUTERS

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Tuesday he saw no immediate need to overhaul the central bank’s monetary policy framework, as the hit to the economy from COVID-19 keeps inflation distant from its 2% inflation target.

But he said the BOJ would not rule out future debate of a review, as other major central banks such as the U.S. Federal Reserve look deeper into why inflation remains subdued despite years of aggressive monetary easing.

“There is no need now to review our policy framework. But there could be debate at an appropriate timing in the future,” Kuroda said in a semi-annual testimony to parliament.

Kuroda also stuck to the BOJ’s view that Japan’s economy is on track for a moderate recovery, even as a recent resurgence in coronavirus infections cloud the outlook.

In its current quarterly forecasts issued last month, the BOJ expects Japan’s economy to contract 5.5% in the fiscal year ending in March 2021 but expand 3.6% in the following year.

“I don’t think we need to overhaul our projections” due to the global resurgence in COVID-19 infections, Kuroda said.

“Our view is that Japan isn’t heading toward deflation, though we’re watching developments in service consumption and capital expenditure carefully,” he added.

Under a policy dubbed yield curve control, the BOJ sets its short-term rate target at -0.1% and that for long-term rates around zero. It also buys huge amounts of government bonds and risky assets, though inflation remains distant from its 2% goal.

Reporting by Leika Kihara; Editing by Chris Gallagher and Sam Holmes