Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Kuroda warns BOJ isn't keeping rates low to fund fiscal spending

Published 11/29/2019, 01:24 AM
Updated 11/29/2019, 01:24 AM
© Reuters. Bank of Japan (BOJ) Governor Haruhiko Kuroda, speaks during an interview with Reuters in Washington

© Reuters. Bank of Japan (BOJ) Governor Haruhiko Kuroda, speaks during an interview with Reuters in Washington

By Leika Kihara

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda said the central bank's ultra-loose monetary policy is aimed at hitting its inflation target, rather than funding government spending, warning against complacency in getting Japan's fiscal house in order.

Ruling party lawmakers have been piling pressure on the government to compile a big spending package, increasing the chance fiscal policy could play a bigger role in sustaining a fragile economic recovery but at the cost of adding to a debt-pile that is the biggest among advanced economies.

Kuroda repeated his view that the effect of fiscal spending in stimulating the economy can be heightened if complemented by ultra-loose monetary policy.

But that did not mean the BOJ will keep printing money to bank-roll public debt, he added.

"Our monetary easing efforts are aimed at achieving our price target, not at helping fund government spending. There needs to be a clear line drawn on this point," Kuroda told a parliamentary session on Friday.

Kuroda also said structural reforms must accompany fiscal and monetary stimulus measures to heighten the economy's growth potential.

"A mix of fiscal and monetary policy isn't enough. It's also important to proceed with deregulation and structural reforms to heighten Japan's medium- and long-term growth potential," he said.

Kuroda also said the central bank won't hesitate to ease policy further if risks heighten that the momentum toward hitting its 2% inflation target is lost.

There's "ample room" for further easing at present, he said. The BOJ's government bond purchases are not hampering market functions, while the government maintains market trust in its fiscal management, he added.

Under a policy dubbed yield curve control, the BOJ pledges to cap long-term borrowing costs around zero in an effort to reflate growth and achieve its elusive 2% inflation target.

© Reuters. Bank of Japan (BOJ) Governor Haruhiko Kuroda, speaks during an interview with Reuters in Washington

Critics warn that years of ultra-low rates have allowed the government to keep spending and drag its feet in fixing Japan's tattered finances.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.