Kuroda defends BOJ's ultra-dovish stance in his final policy meeting


Haruhiko Kuroda, governor of the Bank of Japan (BOJ), at the central bank’s headquarters in Tokyo, Japan, on Thursday, May 27, 2021.

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Japan’s outgoing central governor Haruhiko Kuroda defended the Bank of Japan’s ultra-dovish monetary policy stance at his final policy meeting on Friday.

The Bank of Japan left its negative interest rate unchanged at -0.1%, widely in line with expectations – and reiterated ­the central bank’s target to keep the yield on the 10-year Japanese Government Bond (JGB) around 0%.

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The central bank has kept its benchmark interest rate unchanged since 2016, when it implemented its yield curve control (YCC) policy, which seeks to defend its target on JGBs by purchasing an unlimited amount of government bonds.

Kuroda was first appointed in March 2013. His current five-year term will end on April 8, and is set to be replaced by incoming BOJ chief Kazuo Ueda. /want to mention Ueda high up

Kuroda has led the central bank’s ultra-dovish monetary policy for the past decade – even as global central banks in recent months raised interest rates in a bid to tame inflation.

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The BOJ shocked global markets in December when it widened its tolerance range to 50 basis points above and below its 0% target — up from 25 basis points previously.

On Friday, the yield on 10-year Japanese government bonds fell to 0.441%, below the upper ceiling of the central bank’s tolerance range of 50 basis points above and below 0%. The Japanese yen weakened roughly 0.3% after the announcement and traded at 136.6 against the U.S. dollar.

“Japan’s economy, despite being affected by factors such as high commodity prices, has picked up as the resumption of economic activity has progressed,” Bank of Japan said in its policy statement on Friday, concluding the two-day meeting.

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“Financial conditions have been accommodative on the whole, although weakness in firms’ financial positions has remained in some segments,” the central bank said.

New BOJ leadership

Japan’s upper house in parliament approved Ueda to be the next central bank governor, Kyodo reported. This sets the stage for the Japanese government to formally appoint Ueda after the lower house’s approval on Thursday.

The parliament also approved Shinichi Uchida and Ryozo Himino as the next Bank of Japan deputy governors, Kyodo said.

The central bank held off changes to its yield curve control policy and inflation target, saying it will aim “to achieve the price stability target of 2 percent, as long as it is necessary for maintaining that target in a stable manner.”

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The Bank of Japan “will continue expanding the monetary base until the year-on-year rate of increase in the observed CPI (all items less fresh food) exceeds 2 percent and stays above the target in a stable manner,” it said in a statement.

Japan’s consumer price index rose 4.2% in January — the highest CPI reading in 41 years. The next report is due out on Feb. 24.

The central bank, however, ended its statement on an optimistic note, and said further growth lies ahead for the nation’s economy.

“Japan’s economy is likely to recover, with the impact of COVID-19 and supply-side constraints waning although it is expected to be under downward pressure stemming from high commodity prices and slowdowns in overseas economies,” the central bank said.

“Japan’s economy is projected to continue growing at a pace above its potential growth rate,” it said.



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