TOKYO- The Bank of Japan will not hesitate to further ease monetary policy while making adjustments as necessary to achieve its 2 percent inflation target, as risks from overseas economies remain large, its governor Haruhiko Kuroda said on Wednesday.
Kuroda said consumer inflation, which is hovering around 0.5 percent, would accelerate towards the 2 percent target given a positive output gap and rises in inflation expectations.
But the inflation trend will be affected for the time being by declines in oil prices, he added.
“We will adjust policy as necessary to maintain momentum towards our price stability target while examining risks,” Kuroda told a quarterly meeting of the central bank’s regional branch managers.
“We 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 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 percent in fiscal 2020 and to accelerate to 1.5 percent 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 percent price goal.
At the branch managers’ meeting, Kuroda held to the BOJ’s view that the world’s third-largest economy will see moderate growth despite weak exports, output and business mood, which have been hit by the global slowdown and natural disasters at home.
The economy will continue to expand moderately as the ripple effects from slowing global growth on domestic demand will be limited, he added. – Reuters