The Bank of Japan (BOJ) would not hesitate to ease monetary policy further if necessary in order to maintain momentum toward a 2 percent inflation target, Governor Haruhiko Kuroda said in a speech on Wednesday (Jan 15). It expected consumer inflation would accelerate toward the target, amid positive output gap and rises in inflation expectations.
The central bank, he went on, will not hesitate to take additional easing steps if risks heighten to an extent that the momentum towards the price target is undermined. Kuroda dropped a few clues on what steps the central bank might take next.
He was speaking ahead of the Jan. 20-21 rate review, at which the BOJ is likely to slightly revise up its economic forecasts for the fiscal year starting in April, reflecting the expected boost from the government’s latest spending package.
The central bank is widely expected to keep monetary policy steady. Any upward revision will allow the BOJ to justify standing pat on policy for the time being.
The BOJ’s nine-member board will also review its current forecasts for core consumer inflation to hit 1.1% in fiscal 2020 and to accelerate to 1.5% the following year, although big changes to these projections are seen unlikely. Projections of tame inflation should bolster market views that the BOJ will keep monetary policy ultra-loose to achieve its elusive 2% price goal.