April 27, 2020 / 6:50 AM / a month ago

HIGHLIGHTS-BOJ Governor Kuroda's comments at news conference

April 27 (Reuters) - The Bank of Japan expanded monetary stimulus on Monday and pledged to buy an unlimited amount of bonds to keep borrowing costs low as the government tries to spend its way out of the deepening economic pain from the coronavirus pandemic.

Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:

CORONAVIRUS IMPACT

“The spread of the coronavirus at home and abroad is inflicting a severe impact on Japan’s economy ... The economy will remain in a severe state for the time being.”

PRICE TARGET

“Achievement of our price target ... will take time. But there’s no change to the fact we will strive to achieve our 2% price target.”

“It’s important to maintain an accommodative monetary policy stance now, so that in the long run Japan’s economy can head toward our price target.”

BOND BUYING

“By removing the bond-buying guidance, we clarified our intention to buy government bonds aggressively without setting a limit.”

“As in other countries, Japan has taken massive fiscal stimulus measures. The BOJ is also undertaking powerful monetary easing ... We will buy as many government bonds as necessary under YCC (yield curve control). We’re buying government bonds as part of our monetary policy steps. But our measures and fiscal stimulus will also have a mutually reinforcing impact.”

“We aren’t monetising government debt. Our stronger commitment on bond buying is aimed at maintaining liquidity in the bond market, and to keep the yield curve stably low to achieve our interest rate targets. It’s a monetary policy step based on YCC. But we also hope it will heighten the effect of a policy mix between fiscal and monetary measures.”

(On whether the BOJ will slow its bond buying if interest rates fall too much): “I don’t expect interest rates to fall too much. But we won’t fret much even if long-term interest rates fall slightly below zero.”

FUTURE OPTIONS

“We won’t hesitate to take additional monetary easing steps if needed. As for future policy options, we can expand the size of our asset buying or market operations, as well as cut interest rates. We will choose the most appropriate option at the time. We won’t rule out interest rate cuts as a policy option.”

INTEREST RATES

“Our interest rate targets won’t change just because the coronavirus pandemic subsides. Current interest rates will stay for quite a long time. That doesn’t mean we will continue with our current policy forever.”

COORDINATION WITH GOVERNMENT

“The current crisis could have a bigger negative impact than the Lehman shock. The government and the central bank obviously need to work together, particularly at a time like this. It’s important for the two to coordinate.”

YIELD CURVE

“We haven’t veered away from our stance that excessive flattening of the yield curve is undesirable. But at a time like this, what’s most important is to keep the yield curve stably low under YCC.”

INFLATION

“The global economy is coming under pressure both from shrinking demand and supply constraints. Inflation likely won’t rise quickly anywhere. We’re not abandoning our biggest mandate as a central bank, which is to achieve price stability. But now, what’s most important is to keep monetary policy ultra-loose without triggering (unwelcome) inflation. If prices rise again, we can tighten monetary policy. But now it’s important to focus on preventing an economic slump.”

“I don’t think there’s a risk Japan will revert to deflation. But short-term inflation expectations are falling quite a bit, and those for the long term are also falling somewhat. This needs to be watched carefully.”

On recent yen moves: "Interest rate differentials are among factors that affect currency moves. But currency rates and interest rate differentials don't move parallel all the time ... I don't see a huge risk of a sharp yen rise. I don't see current exchange-rate moves as inflicting huge damage to Japan's economy." Reporting by Leika Kihara, Daniel Leussink, Tetsushi Kajimoto; Editing by Chris Gallagher

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