Bank of Japan policymaker rules out stimulus withdrawal even after economy recovers

[TOKYO] Bank of Japan must maintain its massive stimulus even when the economy rebounds from the pandemic's hit, board member Asahi Noguchi said, reinforcing exectations the country will lag behind in withdrawing crisis-mode policy measures.

In a speech, Noguchi sounded cautiously optimistic on Japan's economic outlook, saying its recovery will become clearer from the year-end onwards as vaccine rollouts help to ease the effects of the Covid-19 pandemic.

But Japan's low trend inflation means a re-opening of the economy likely will not trigger a spike in wages and inflation seen in other advanced nations, he said.

"As a result, withdrawal of monetary easing about to be undertaken by other central banks won't be an option for the BOJ," Noguchi, considered among advocates of aggressive monetary easing in the nine-member board, said on Thursday.

Noguchi also said the BOJ must be cautious about ending a pandemic-relief loan programme that expires in March given the need to support the fragile economy, signalling readiness to argue for another extention to the deadline.

Downside risks warranted great attention stemming from the spread of variants as well as its impacts on auto industry supply chains, as uncertainty remains high, Noguchi added.

"What's most notable at today's speech is the fact that Noguchi suggested Japan is different from other countries who face rising inflation," said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

"It's true global inflation was on the G-20 agenda, while Japan remains mired in disinflation. As such, Noguchi signaled no immediate need to change monetary policy."

Under a policy dubbed yield curve control (YCC), the BOJ guides short-term interest rates at -0.1 per cent and 10-year bond yields around 0 per cent. It also buys government bonds and risky assets to achieve its elusive 2 per cent inflation target.

However, years of ultra-loose policy have failed to boost inflation as weak consumption keeps firms from charging more for their goods and services, keeping inflation well below its 2 per cent target.

REUTERS