TOKYO : Japan’s lower house of parliament is conducting hearings on the government’s nominees for the central bank’s two new deputy governors, Ryozo Himino and Shinichi Uchida.
Himino is former head of Japan’s banking sector watchdog, while Uchida is a Bank of Japan (BOJ) executive. Following are excerpts from their comments, in Japanese, as translated by Reuters:
Uchida:
“Domestic and overseas uncertainties regarding Japan’s economy remain very high. Consumer inflation hit 4.2 per cent, well exceeding the BOJ’s 2 per cent target, but this is due mostly to companies passing on higher raw material costs to households…
“It’s necessary to support Japan’s economy by maintaining the current ultra-loose policy.
“While the ultra-loose policy is having a negative impact on financial institutions’ profits, the overall benefits of stimulus are exceeding the costs.
“Instead of reviewing the ultra-loose policy just because there are side-effects, the BOJ must come up with ideas to mitigate the cost and sustain the policy.”
ON WHETHER END TO NEGATIVE INTEREST RATES WILL BE DISTANT
“The BOJ’s current interest rate target levels, including the negative short-term rate, are appropriate. If Japan can foresee inflation reaching 2 per cent, the target levels could be reviewed. But that won’t come immediately.”
ON BOJ’S EXIT POLICY
“It’s premature to discuss an exit because we can’t foresee inflation sustainably and stably achieve 2 per cent yet. As for a future exit, the key would be how to adjust interest rates and its huge balance sheet. In what order the BOJ does this, and at what pace, will depend on market conditions at the time.
“I have been involved in the drafting of the BOJ’s current policy, and I can say we thought about an exit strategy when we introduced the ultra-loose policy. So, it’s possible for the BOJ to exit smoothly regardless of economic, price and market conditions at the time.”
HIMINO:
“We must achieve the inflation target sustainably and stably along with wage hikes.
“We need to carefully monitor financial intermediation and side-effects of easing in addition to the economy and prices.
“Given the current situation and the outlook, the BOJ’s current policy is appropriate and it must underpin the economy with monetary easing.
“Financial system stability, we are not in a situation where we have specific concerns, but there appears hidden fragility that emerges overseas. We need to carefully monitor if inequality and fragility may be hiding somewhere.”
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