BOJ Governor: Bank to Debate Monetary Policy

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Bank of JapanThe Bank of Japan Governor Haruhiko Kuroda said on Wednesday that the bank governing board is going to debate its monetary policy this month assuming that Japan is currently on a path of moderate recovery, implying that increasing stimulus is not necessarily an immediate option.

“We’re seeing some weakness in exports and output, but there’s no change to the view Japan’s economy is growing moderately,” said Kuroda, adding that capital expenditure in Japan remains firm.

Japan's economy rose 2.1% (year-to-year) on Q1, however many analysts consider that economic growth is going to slow down on the second quarter, mostly caused by the global trade tensions and an upcoming sales tax increase that would hinder consumption.

However, he made clear that despite they're assuming that Japan will keep on a moderate recovery path, the Bank would be still ready to consider an easing monetary policy if the economy loses its impulse.

“The board will debate policy this month based on this view,” he said. “Having said that, we will swiftly consider additional monetary easing steps if the economy loses momentum for hitting our inflation target,” he added.

Annual core consumer inflation was at 0.8% in May, way below the Bank of Japan's target and despite the Bank's effort to keep the cash rate below zero.

Despite having the option to top up stimulus, it's highly unlikely they will do so as they have kept the interest rates too low, affecting commercial banks and leaving the central bank with fewer tools to fight any upcoming economic recession.

Japanese indexes closed on the negative side this Wednesday, with the Nikkei 225 losing 0,31%. The USD/JPY pair stood still at 108,22, while the EUR/JPY rose 0,02%, hitting the 121,33 level.

The Bank of Japan board of governors is expected to meet on July 29-30.

Sara Patterson has a Master’s Degree in political science and enjoys analyzing both current events and the international markets to get a fuller perspective of the currency market. Before turning to financial writing, she taught English writing skills to high-school age students. Sara’s work has been published on various financial and Forex blogs.