UPDATE 3-BOJ’s reflationist board member sees no need for more policy steps


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TOKYO/OITA, Japan (Reuters) – Bank of Japan’s vocal advocate of reflationary policy said on Thursday he saw no need to take extra steps to complement the government’s fresh stimulus plan, bolstering market views the BOJ is in no mood to top up its already massive monetary easing.

FILE PHOTO: Newly-appointed Bank of Japan (BOJ) board member Yutaka Harada speaks during a news conference at the BOJ headquarters in Tokyo March 26, 2015. New Bank of Japan board member Yutaka Harada said on Thursday it is difficult, and even impossible, to consider the central bank’s 2 percent inflation target and the two-year timeframe for achieving it as “rigid” goals. REUTERS/Yuya Shino

Yutaka Harada made the remark days after Governor Haruhiko Kuroda made similar comments, underlining the central bank’s preference to save its limited ammunition in case the economy takes a bigger hit from overseas risks.

The cabinet approved a $122 billion fiscal package on Thursday to support stalling growth in the world’s third-largest economy amid offshore risks and as policymakers look to sustain activity beyond the 2020 Tokyo Olympics.

Harada, who serves as a member of the BOJ’s nine-member board, said the central bank should continue its current monetary stimulus in order for prices and interest rates to eventually pick up.

“Given that current low interest rates were caused by deflationary monetary policy in the past, the only way is to wait for prices and interest rates to rise while continuing current monetary easing aimed at sustaining economic growth,” Harada said in an earlier speech to business leaders in Oita, southern Japan.

Harada told reporters that the central bank should stick to its 2% inflation target, which has bolstered the economy and stabilized the currency market, because the same 2% goal is shared with other advanced economies, making it the “global standard.”


Years of the BOJ’s heavy money printing have failed to fire up inflation and crushed long-term interest rates near zero, drawing criticism from financial institutions for narrowing their margins and hurting their profits.

Harada, a vocal advocate of aggressive monetary easing, countered that criticism, contending that bank management woes are “structural problems” caused by higher savings and weaker demand for loans.

He urged banks to address this problem, saying that raising interest rates is not a solution.

“If interest rates are raised, that could lower lending demand, cause prices to fall and the yen to rise, and trigger a recession and bankruptcies which will cause banks’ credit costs to shoot up,” he said in the speech to local business leaders.

Banks should be able grow earnings by downsizing and converting to profitable business, Harada added.

Under a policy dubbed yield curve control, the BOJ aims to guide short-term rates at minus 0.1% and the 10-year government bond yield around 0%.

It kept policy steady at its last rate review in October but tweaked its forward guidance to say it would maintain ultra-low rates or even cut them for as long as needed to gauge overseas risks.

The BOJ’s nine-member board is divided between those like Harada who see room to ramp up stimulus, and those who are more worried about the rising cost of prolonged easing.

Harada hailed positive effects of monetary stimulus, including stimulating investment, boosting share prices and weakening the Japanese currency.

“Bold monetary easing has stimulated the economy, boosted tax revenue and improved Japan’s fiscal conditions.

Reporting by Tetsushi Kajimoto; Editing by Chang-Ran Kim & Shri Navaratnam


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