Wakatabe mentioned the BOJ’s coverage overview in March will not result in a withdrawal of financial stimulus, however will concentrate on making its instruments “sustainable, efficient and nimble”.
The important thing could be to make sure the central financial institution has ample ammunition to fight any future shock to the economic system, akin to one triggered by the coronavirus pandemic, he added.
“The BOJ should information coverage in a approach that ensures actual rates of interest do not spike abruptly,” Wakatabe instructed reporters after a web-based assembly with enterprise leaders on Wednesday.
“We should additionally keep our dedication to realize 2% inflation. Based mostly on the dedication, we’ll be able to decrease nominal charges as wanted,” he mentioned.
Wakatabe declined to touch upon whether or not the March overview will take a look at methods to handle the unwanted side effects of destructive charges, in order that it may possibly push charges deeper into minus territory.
Some analysts speculate the BOJ may broaden its mortgage programmes to channel extra money to monetary establishments and companies that enhance funding in inexperienced and digital expertise.
When requested whether or not that was a risk, Wakatabe mentioned the thought was “one thing past the scope of the March examination” however price exploring sooner or later.
Because the pandemic forces it to keep up an enormous stimulus programme for a protracted interval, the BOJ plans to announce subsequent month methods to make its instruments extra sustainable.
The BOJ has mentioned the overview will not result in an overhaul of its yield curve management (YCC) coverage or its 2% inflation goal.
Sources have instructed Reuters the BOJ may permit long-term rates of interest to maneuver extra extensively round its 0% goal and tweak its asset-buying programme so it may possibly buy dangerous property extra flexibly.
“What I would like to stress is that the coverage examination will not be about dialling again financial stimulus,” Wakatabe mentioned. “Since our value goal and coverage framework have been working nicely thus far, there isn’t any want to alter them.”
Underneath YCC, the BOJ guides short-term rates of interest at -0.1% and 10-year bond yields round 0% through enormous bond purchases. It additionally buys dangerous property, akin to exchange-traded funds (ETF), as a part of efforts to realize its elusive 2% inflation goal.
(Reporting by Leika Kihara; Enhancing by Chang-Ran Kim and Jacqueline Wong)
By Leika Kihara