BoJ keeps policy unchanged
BLOOMBERG
16 June
The Bank of Japan (BoJ) refrained from
expanding monetary stimulus ahead of
the UK vote on Brexit next week that could
roil global markets, and before a domestic
election in which the political opposition
has made the banks negative interest-rate
policy an issue.
With the yen soaring to its strongest in
almost two years after the decision
Thursday, Governor Haruhiko Kuroda reit-
erated in a press conference in Tokyo that
the central bank wont hesitate to take
action if needed. He also said the central
bank was carefully monitoring moves in
financial markets and was in touch with
counterparts including the Bank of
England, amid Brexit concerns that he said
had had an impact in the bond market.
Japans bond yields slid to record lows amid
demand for haven assets.The governor also
reiterated his expectation for inflation to hit
policy makers 2 per cent target as forecast
in the fiscal year through March 2018, say-
ing Japans economy continues to expand
gradually and citing solid plans for business
investment. Even so, he said Im well
aware if the yen rises excessively, it could
well have a big impact on inflation pace.
Speaking of the strengthening yen, we
think its not favourable that the yen rises
and volatility increases without reflecting
economic fundamentals, Kuroda said
after the yen climbed through 104 per dol-
lar for the first time since 2014. We want to
carefully watch and pay attention to the
international financial market, including
the foreign exchange. He reiterated his
position that we dont decide monetary
policy based on currency moves.
The BOJ earlier held its key interest rate
at minus 0.1 per cent and kept the annual
target for expanding the monetary base at
80 trillion yen ($764 billion). About 28 per
cent of economists in a Bloomberg survey
had forecast additional easing at this meet-
ing, with 55 per cent looking to the next
gathering July 28-29, when the BOJ will
update its inflation projections.
By holding off on further expansion
now, Kuroda can better watch the impact of
Britains vote, see the outcome of a
Japanese upper house election on July 10
and consider the path of US monetary pol-
icy. The governor declined to comment on
the possibility of an unscheduled BOJ
meeting ahead of the next meeting.
The BOJ will have to take bold action to
arrest the strengthening yen and if it tries
something in line with what it did before,
therell be disappointment, said Takeshi
Minami, chief economist at Norinchukin
Research Institute. With the Brexit vote
ahead, the BOJ couldnt move this time
because the result on June 23 may erase
the impact of whatever it did now.
The yen has now surged more than 15
per cent this year, even with the introduc-
tion of negative rates. The Topix stocks
index closed down 2.8 per cent.
If the UK votes for Brexit, the Japanese
currency may gain as much as 6 yen per
dollar and while the Nikkei 225 Stock
Average could drop by 3,000, according
to a report by Mizuho Research Inst-
itute earlier this month.
The Bank of Japan is closely
exchanging opinions with the Bank of
England and other central banks and so
forth, Kuroda said.
WE THINK ITS NOT
FAVOURABLE THAT THE YEN
RISES AND VOLATILITY
INCREASES WITHOUT
REFLECTING ECONOMIC
FUNDAMENTALS
HARUHIKO KURODA
Governor, Bank of Japan