NEW YORK (Reuters) - Bank of Japan Governor Haruhiko Kuroda said there were “no limits” to what the central bank can do if it saw the need to adjust monetary policy in the future, signalling readiness to expand stimulus further if risks threatened its price target.
Kuroda, in an interview with Japan’s Jiji news agency conducted on Thursday, said the country was moving steadily toward achieving the BOJ’s 2 percent inflation target with no big risks to the outlook for now.
But he added that external risks “must be watched carefully” given recent volatile market moves that reflected overseas developments such as the escalating tension in Ukraine.
The BOJ offered an intense burst of monetary stimulus in April last year, pledging to buy assets aggressively to accelerate consumer inflation to 2 percent in roughly two years in a country mired in deflation for 15 years.
It has stood pat since then despite market expectations of additional stimulus to cushion the impact from a sales tax hike that will take effect in April. It has argued that the current ultra-loose policy was enough to keep the economy on track to meet the price target.
Kuroda said what was most important was to achieve the 2 percent price target at an early date, according to Jiji, suggesting that the BOJ was ready to act if meeting the target became difficult.
He also said it was “not as if there weren’t any steps left” for the BOJ to take if it were to ease again, countering views held by some market participants that having delivered a massive stimulus last year, the BOJ had no tools left to deploy.
On specific steps the BOJ could take if it were to act again, Kuroda said only that that depended on economic and price developments at the time, according to Jiji.
Some market participants speculate the BOJ, despite its upbeat economic and price forecasts, may try to surprise markets by acting quickly and pre-emptively. Kuroda countered that view too, saying he wasn’t feeling pressure to “outwit” markets.
Reporting by Leika Kihara; Editing by Chizu Nomiyama