BOJ ready to consider additional stimulus

Japanese central bank board member says extra measures are possible if needed

PUBLISHED : Tuesday, 23 July, 2013, 12:00am
UPDATED : Tuesday, 23 July, 2013, 5:17am

The Bank of Japan (BOJ) is prepared to implement more stimulus measures if the economy's recovery is threatened, board member Takehiro Sato said yesterday as he pointed to risks such as the slowdown in Chinese growth.

He also said the central bank's 2 per cent inflation target was a flexible one that did not necessarily have to be achieved in two years - a timeframe that had been outlined by central bank governor Haruhiko Kuroda.

Sato, an economist who joined the bank's board last year, said Japan was headed for a sustainable recovery as household sentiment and exports improved, but he was concerned about slowing growth in China and other emerging economies.

"A high degree of uncertainty remains concerning the global economy, and I see risks to the economic outlook as somewhat tilted to the downside," Sato said.

Under Kuroda's leadership, the Bank of Japan unleashed an intense burst of monetary stimulus in April, pledging to double the supply of money in two years to meet its inflation target, and has held off on any further easing.

While that "big bang" approach was a shift from the previous one of incremental steps, Sato said the bank would respond if recovery was threatened.

"The BOJ does not exclude the implementation of additional measures and will not hesitate to fine-tune its policies flexibly when unexpected tail risks materialise," he said in a speech to business leaders in Fukushima, northeastern Japan.

Sato, considered to be among those more cautious on the economy's outlook on the nine-member board, said he had doubts that the 2 per cent inflation target could be achieved in two years, and said there should be some flexibility in interpreting it.

"If the inflation rate is projected to stabilise within a certain range, with the median being 2 per cent price growth, the main objective of the bank's policy will have been fulfilled," he said.

Many analysts also see the two-year timeframe as too ambitious for a country mired in deflation for 15 years.