(Reuters) - The Bank of Japan kept monetary settings steady on Tuesday and stuck to its view that the economy will gradually recover from the coronavirus pandemic, signalling that it has taken enough steps to support growth for now.
Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:
“We won’t hesitate to take additional easing steps as needed. That means we are ready to expand our lending facilities if necessary.”
“Given uncertainty on how the pandemic could affect our economy and markets, we may need to ponder new measures. We’ll respond flexibly.”
“We won’t hesitate to take additional monetary easing steps based on our three pillars. Options include an expansion of our special programmes (to combat the pandemic), cuts in our yield targets, and an expansion of our ETF purchases.”
“It’s true Japan’s economy has lost momentum to achieve the target now ... While the economy could head for a recovery, prices may remain in negative territory for some time. But once economic growth accelerates, inflation is likely to pick up. We will stick to our 2% inflation target.”
“Stock prices move reflecting investors’ views on the economic and corporate profit outlook. Corporate profits are worsening now. But markets expect conditions to improve and that’s reflected in market moves.”
“Board members agreed that Japan’s economy is expected to improve in the somewhat long run as the impact from the pandemic subsides. Our view on the economic outlook hasn’t changed much since April. But there is strong uncertainty on the outlook.”
“The biggest problem for the world now is the rapid increase in infections in emerging economies ... If a second wave of inflections occurs in advanced nations, that could lead to lockdowns and other measures again, which will have a negative impact on the economies.”
On what would be required for the BOJ to consider ending crisis-response steps: “As the pandemic subsides, the economy may recover and companies may come under less funding strains ... But with the need to live under new standards, the economic recovery may be slow in forthcoming even if the pandemic is contained ...
“If the need for our support diminishes, we can ponder an exit. But we are ready to keep these supports in place for quite a long time.”
On whether the pandemic could change the way central banks conduct monetary policy: “When you look at the Fed and the ECB, they are essentially taking steps to ease corporate funding strains and calm markets like us. They may appear to be using different frameworks, but what they are doing and aiming to achieve are pretty similar.
“When both demand and supply are shrinking, companies come under strain. But I don’t think we need to see this as something that will last permanently. I don’t think we need to feel that with the pandemic, the tools and policies of central banks need to change a lot.”
“There’s no change to our view that excessive declines in super-long bond yields are undesirable ... But what’s important is to keep the yield curve stably low.”
On how sovereign credit rating downgrades could affect bond yields: “I don’t think private credit ratings are always accurate ... When more bonds are issued that will push up interest rates. But if central banks keep monetary policy loose, that will keep rates low ... I don’t think credit rating downgrades could push up interest rates now given (the monetary policies of) Japan, the United States and Europe.”
“Since markets have stabilised and the risk premium has fallen, our ETF buying has slowed as a result. But domestic and overseas developments remain highly uncertain due to the coronavirus pandemic. Volatility indicators remain high for the stock market, unlike those for currency and bond markets. It’s thus important to maintain our stance of actively buying ETFs for the time being.”
On what would be considered debt financing by a central bank: “When central banks can no longer independently buy bonds as a monetary policy means, and automatically need to buy them when the government issues them ... that could cause concern over debt monetisation.”
When asked whether the BOJ won’t be monetising debt even if its holdings exceed 70%: “Yes, I believe so.”
On whether the BOJ can extend the March 2021 deadline for its corporate bond, commercial paper buying: “We can extend it beyond March depending on market conditions.”
Reporting by Leika Kihara, Kaori Kaneko, Tetsushi Kajimoto; Editing by Chris Gallagher