Kuroda says BOJ will work closely with Suga's government

Tokyo

BANK of Japan (BOJ) governor Haruhiko Kuroda said the central bank will keep close coordination with the new government led by Prime Minister Yoshihide Suga, to pull the pandemic-hit economy out of its slump.

Mr Kuroda, seeking to reassure investors that the BOJ will keep easing in pursuit of its 2 per cent inflation target and maintain its close relationship with the government, was speaking to reporters on Thursday.

The country's central bank had earlier stood pat on its key interest rate and its asset purchases, a result expected by 95 per cent of 44 economists Bloomberg polled. The bank also upgraded its economic assessment for the first time since the virus hit, reflecting a bottoming of Japan's slump.

Mr Suga, elected Wednesday for Japan's top job, has said he sees no need for any immediate changes in BOJ policies that have helped keep financial markets stable and delivered credit to companies amid Covid-19.

The BOJ's decision and Mr Kuroda's comments reinforced the message that little change is likely for now, barring a sharp worsening of the pandemic or a run on markets.

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He said: "The BOJ will continue to solidly cooperate with the government as it manages policy." He added that the current crisis should not stop structural reforms, an area where Mr Suga has placed emphasis.

The BOJ raised its assessment of the economy, saying it has started to pick up, with activity slowly resuming, although the pace of improvement was only likely to be moderate, given that the pandemic is continuing to hit countries worldwide.

Analysts expect gross domestic product to rebound by an annualised 15.1 per cent this quarter - a big jump - but not enough to make up for the record contraction in the three months through June.

Mr Kuroda went out of his way to defend the importance of the BOJ's 2 per cent inflation target. Temporary price impacts from the government's stimulus measures are not overly concerning, he said, but the bank will not hesitate to ease if the labour market starts hurting prices.

The BOJ decision came just hours after the US Federal Reserve unveiled its latest policy guidance, committing to inflation that averages 2 per cent over time and forecasting near-zero rates to continue through 2023. BLOOMBERG