TOKYO (Reuters) – Bank of Japan board member Asahi Noguchi emphasised the need for the central bank to “patiently continue” its current monetary easing as it takes a long time to achieve its 2% inflation target amid the coronavirus pandemic.
In a speech, Noguchi sounded cautiously optimistic on Japan’s economic outlook, saying its recovery will become clearer from the year-end onwards as vaccine rollouts help to ease the effects of the COVID-19 pandemic.
Downside risks also warranted great attention stemming from the spread of variants as well as its impacts on auto industry supply chains, as uncertainty remains high, Noguchi added.
“What’s most notable at today’s speech is the fact that Noguchi suggested Japan is different from other countries who face rising inflation,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
“It’s true global inflation was on the G20 agenda, while Japan remains mired in disinflation. As such, Noguchi signaled no immediate need to change monetary policy.”
Noguchi, an academic who is a vocal advocate of massive easing, in April joined a board that was split between members wary of the rising cost of prolonged easing and proponents of stimulus.
Under a policy dubbed yield curve control (YCC), the BOJ guides short-term interest rates at -0.1% and 10-year bond yields around 0%. It also buys government bonds and risky assets to achieve its elusive 2% inflation target.
However, years of ultra-loose policy have failed to boost inflation as weak consumption keeps firms from charging more for their goods and services, keeping inflation well below its 2% target.
(Reporting by Tetsushi Kajimoto; Editing by Stephen Coates)
