Saturday, 17 October 2020
Bank of Japan Deputy Governor Masazumi Wakatabe said the central bank had plenty of tools to expand if it saw the need to ramp up stimulus for the economy or counter the negative impact a strong yen could have on inflation.While the BOJ did not directly target exchange rates in guiding policy, the central bank was carefully watching yen moves due to their impact on Japanese price moves, he said.
"If we judge that inflation dynamics would be further eroded or weakened by exchange rate moves, that is the time we should think of taking policy action," Wakatabe said."We've already set up a whole bunch of tools" that can be expanded, Wakatabe told a seminar on Friday. "We have to be innovative whenever we think about engaging in monetary policy."
Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at -0.1% and the 10-year government bond yield around 0%. It also buys massive amounts of assets and pumps money to firms hit by COVID-19 via financial institutions using a new lending facility.Wakatabe said the BOJ would not rule out the possibility of deepening negative rates, shrugging off the view that doing so was no longer an option due to the strain that prolonged ultra-low rates was inflicting on bank profits.