The Bank of Japan (BOJ) has announced that it will keep its monetary policy settings and reassured markets that it will not immediately follow the Federal Reserve in rolling back its stimulus program, as inflation remained low despite signs of economic improvement.
BOJ governor Haruhiko Kuroda also denied speculation that the central bank is engaging in “stealth tapering”.
According to sources quoted by Reuters, the slowdown in the BOJ’s buying of bonds is not intentional, and instead is caused by a stable bond market.
“The slowdown came as a result of our policy of guiding yields at appropriate levels,” BOJ executive director Masayoshi Amamiya told Parliament on Tuesday.
Kuroda has also dismissed calls from several legislators and industry figures, which urged him to disclose how the central bank plans to exit its ultra-easy money policy. He said that such calls were premature, given that inflation was still far from its target of 2%.
Last week, Akio Negishi, head of Japan’s life insurance lobby, said the BOJ should pay heed to market voices and “shouldn't be afraid of revising (its exit strategy) in the future and openly debate the subject now.”
Signs of improvement have presented a dilemma for the BOJ, as it must be clear about its plans to eventually roll back its stimulus policy, but it also must ensure markets that the stimulus exit will not happen anytime soon to avoid confusion or panic among investors.
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