(Reuters) - The Bank of Japan held off on expanding stimulus on Tuesday but signalled its readiness to do so “without hesitation,” if a global slowdown jeopardizes the country’s economic recovery.
Growing fallout from the U.S.-China trade war has prompted major central banks to signal more easing and put pressure on the BOJ, which has far less policy ammunition left to deal with a significant downturn.
Following are comments from BOJ Governor Haruhiko Kuroda at his post-meeting news conference:
“I don’t think Japan has lost momentum to hit the BOJ’s price goal, or that there is an imminent risk of this happening. But overseas risks are heightening. If this is prolonged, that could increase risks for Japan’s economy and threaten the economy’s momentum to hit our price goal. If this happens, we will ease policy without hesitation.”
“Today, we went a step forward by saying we’ll take additional easing steps without hesitation if there is a risk the economy will lose momentum for hitting our price target. Previously, we said only that we will consider acting if the economy loses momentum for hitting our price goal.”
“It’s true we need to pay attention to downside risks for Japan’s economy. But for now, we expect the economy to continue expanding moderately, and that it is sustaining momentum for hitting our price goal. What’s important is to ensure that momentum by patiently maintaining our powerful monetary easing.”
“We can cut short-, long-term interest rates, increase asset buying or accelerate the pace of base money expansion. We can also deploy a combination of these steps, or take them further. In any case, we will consider steps within our current policy framework. We aim to stimulate growth by lowering real interest rates and risk premia. We still have various means to ease policy.”
“I don’t think Japan’s rates are at levels where the demerits of easing exceed the merits, or that they are approaching such levels.”
“When we were to consider additional easing steps, we of course took into account not just the impact on the economy and prices but also the potential demerits to the financial system. We aren’t looking into specific measures now, so it’s hard to say at this point.”
ON THE ‘MODERN MONETARY THEORY’ (MMT) TOUTED BY SOME U.S. ACADEMICS
“I don’t think it makes theoretical sense for the central bank to underwrite government debt. I don’t think it will have a favourable effect on the economy.”
“Global growth has slowed, particularly in Europe and China. As a result, Japanese exports to China have fallen and business sentiment has deteriorated. The impact of the global slowdown is broadening. On the other hand, domestic demand remains quite firm and this has underpinned Japan’s economy.”
“But if the U.S.-China trade conflict is prolonged, that could slow global growth and will delay its pick-up. That may hurt not just manufacturers’ sentiment but domestic demand.”
Reporting by Leika Kihara; Editing by Rashmi Aich