Bank of Japan Gov. Haruhiko Kuroda on Friday said he will not raise interest rates for a long time, stressing that the central bank's recent policy revision was not a strategic move to normalize its monetary policy.
Speaking in an exclusive interview with The Yomiuri Shimbun on Friday, which marked one month since the central bank modified its monetary policy, Kuroda said clearly, "I don't have any intention to raise the rates for an extended period," emphasizing that the changes were not intended to normalize the policy.
The current policy has a target of keeping the short-term interest rate at minus 0.1 percent and the long-term interest rate at around zero.
Regarding the 2 percent inflation target, Kuroda said it was "a matter of course" that it would be achieved by the end of 2023 when his term is scheduled to expire.
At the Monetary Policy Meeting on July 30 and 31, the central bank introduced forward guidance in which it said, "The Bank intends to maintain the current extremely low levels of short- and long-term interest rates for an extended period of time."
However, as it did not provide any specific numerical figures, there was speculation among some market watchers over possible revisions, including a slight interest-rate hike.
Some observers have pointed out side effects such as the loss of financial institutions' profits due to the negative interest-rate policy.
Even if the long-term interest rate was raised to make it possible for financial institutions to make a profit, Kuroda said, "That won't create a favorable situation for the economy and it won't benefit financial institutions [as it will increase irrecoverable debts]."
As for the duration of the forward guidance, many in the financial sector believe it will continue until around 2020 when the impact of the consumption tax hike, slated to take place in October 2019, can be determined.
Kuroda said, "Whether it will be for a year, three years or five years, I won't specify an exact duration on a calendar." However, he also indicated he understood the sector's view.
Asked about a commitment to maintaining the forward guidance, he questioned "whether it is a definite commitment that could remain no matter what happens, even if there is an extreme natural disaster." But he also said, "I would say it's a relatively strong commitment."
At July's meeting, the central bank agreed to allow a doubling of long-term interest rates from the range of between minus 0.1 percent and 0.1 percent.
Regarding the government bond market, Kuroda said: "With trading volumes increasing and the range of fluctuation widening, the situation is moving in the direction we had expected. I see this as a little improvement."
Kuroda expressed confidence in the Japanese economy, saying, "It has come out of deflation completely, while the employment situation is good and our growth is steady."
Regarding the global economy, the governor raised the subjects of trade friction and the outflow of finances from emerging countries as causes for concern, indicating a bigger downward risk for the global economy than in spring.
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