(Reuters) – The Bank of Japan kept ultra-low interest rates on Friday and maintained its dovish guidance, cementing its status as an outlier among global central banks tightening monetary policy, as recession fears dampen prospects for a solid recovery.
As widely expected, the BOJ left unchanged its -0.1% target for short-term interest rates and a pledge to guide the 10-year bond yield around 0%.
Following are excerpts from BOJ Governor Haruhiko Kuroda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
YEN WEAKNESS
“It’s extremely important for exchange rate moves to reflect economic and financial fundamentals. Recent sharp, one-sided drop in yen heightens uncertainty for Japanese companies, so are bad for the economy.”
FACTORS TO WATCH
“There are various uncertainties that could either push up or down prices, such as the outlook for wages and corporate price-setting behaviour. We need to scrutinise these factors.”
WAGES
“We expect wages to gradually rise, reflecting recent inflation. But we’d like to look at not just numbers but the mechanism at which wages and prices are moving.
INFLATION
“For now, we don’t expect to stably and sustainably achieve 2% inflation next fiscal year.”
JAPAN ECONOMY
“I don’t see the weak yen as offering a big opportunity for Japan’s economy. The weak yen is pushing up import costs for commodities, thereby driving up consumer inflation. Such price hikes aren’t the kind of inflation we’re seeking as they are not accompanied by wage growth.”
BOJ’S UPGRADE OF INFLATION FORECAST
“There’s increased weight on the chance inflation will rise accompanied by wage gains. It’s true we’re getting closer to stably and sustainably achieving 2% inflation. But we’re not there yet.”
IMPACT OF GLOBAL ECONOMIC SLOWDOWN
“It’s true slowing overseas growth could weigh on exports and output. But exports and output are likely to remain at high levels as supply constraints ease … Even with the impact from the overseas slowdown, Japan’s economy is likely to recover.”
(Reporting by Leika Kihara; Editing by Sherry Jacob-Phillips)
