TOKYO: The Bank of Japan should be able to respond more quickly to future economic shocks, Governor Haruhiko Kuroda said Thursday, as the central bank is studying side effects of its prolonged ultraloose monetary policy.
The BOJ last week announced it will assess its current policy framework in March, indicating fine-tuning of its aggressive easing measures, as the bank expects to keep them in place for longer than earlier thought in the wake of the coronavirus pandemic, report agencies."Anything that is unnecessary and inefficient should be avoided," Kuroda said in a speech at a meeting of the Japan Business Federation, or Keidanren.
The BOJ "will adopt a forward-looking perspective of how to achieve stability in economic activity and prices by pursuing further effective monetary easing while mitigating side effects," he said.
The policy assessment comes as the pandemic and subsequent stagnant economic activity have put the bank's elusive 2 percent inflation goal further away.
"As evidenced by the sudden occurrence of the current shock of COVID-19, various shocks may happen in the future," he also said. "It is necessary to be nimble in making effective responses when needed to counter possible changes in economic activity and prices, as well as financial conditions."
In the upcoming assessment, the BOJ will check whether its existing policy tools, including the massive asset purchase program to expand money supply and lower interest rates, have had their intended effects amid growing concerns about their side effects, Kuroda told Keidanren, the nation's largest business lobby.
He admitted that protracted low interest rates hurt the profits of financial institutions and that continued buying of exchange-traded funds affects the functioning of financial markets. The BOJ has maintained short-term interest rates at minus 0.1 percent while guiding long-term rates around zero at present through government bond buying.Despite the bank's 2 percent inflation target, the country's core consumer price index, which excludes volatile fresh food prices, fell 0.9 percent in November from a year earlier, the largest drop in more than a decade.