BOJ's Kuroda warns of overseas risks, signals readiness to adjust policy

TOKYO (Reuters) - Japan’s central bank governor signaled on Thursday readiness to ease monetary policy further, vowing to guide policy appropriately “without any preset conditions in mind”.

FILE PHOTO: Bank of Japan (BOJ) Governor Haruhiko Kuroda attends a news conference at the BOJ headquarters in Tokyo, Japan July 30, 2019. REUTERS/Kim Kyung-Hoon/File Photo

Speaking before leaders of Japan’s securities industry, Haruhiko Kuroda also warned against heightening risks from the global economy but dropped few clues on exactly what the BOJ’s next move will be when it holds its policy review on Oct. 30-31.

At its latest policy meeting last week, the central bank stood pat but signaled the chance of expanding stimulus as early as its next policy meeting in October by issuing a stronger warning against overseas risks.

“We are facing a situation where we need to pay more attention to the risk of the momentum toward 2% price target being undermined,” Kuroda said in a speech at an annual meeting for the securities association.

“With such situation in mind, we will re-examine economic and price developments at the next policy-setting meeting.”

Kuroda also said it was important for the central bank to stick patiently to its powerful monetary easing to maintain momentum toward achieving its 2% inflation target.

“Risks are skewed to the downside, mainly from overseas economies,” Kuroda added, citing the U.S.-China trade war, Brexit, the Middle East, emerging market developments, and effects of Beijing’s stimulus steps, among uncertain factors.

“Global economy is slowing down and it shows no clear sign of turning for the better. Downside risks from overseas economies are heightening. U.S.-China trade friction appears to be prolonged,” he said

In contrast, Kuroda stuck to a bullish note on the Japanese economy, repeating the view that the world’s third largest economy is likely to remain in an expansionary trend, backed by solid domestic demand ahead.

Kuroda reiterated that inflation expectations are likely to rise gradually as brisk economic activity will encourage Japanese firms to become more bullish on their stance of setting wages and prices.

“A moderate uptrend in wages and prices remain intact,” he said. “Prices are expected to accelerate gradually toward 2%,” he said.

Reporting by Tetsushi Kajimoto; Editing by Chris Gallagher and Muralikumar Anantharaman