BoJ Governor Haruhiko Kuroda reiterated to the parliament today that ultra-loose monetary policy must be maintained for now. Consumer inflation is still expected to slow next year and beyond, after spiking above 2% target this year, only because of surging energy prices.
Nevertheless, Kuroda also noted when the right time comes, BoJ will plan an exit from easy policy. “The key would be how to raise interest rates and scale back the BOJ’s expanded balance sheet,” he said. “The BOJ can combine various means and ensure markets remain stable in executing a smooth exit from easy policy. I must add, however, that it won’t be easy,” he said.
Regarding exchange rate depreciation, Kuroda said Fed’s rate hike may not necessarily weaken the Yen, if they also shoot down stock prices.
Prime Minister Fumio Kishida said in the same parliament session, “sharp yen moves are undesirable. While a weak yen benefits exports and firms with overseas assets, it hurts households and some businesses via higher costs.”
