BoJ Governor: Exit Strategy Will be Gradual

Forex News

Haruhiko Kuroda (Bank of Japan Governor) remains confident that the central bank can develop a smooth exit from its ultra-free monetary policy. But still, it's still too early to talk about tightening the policy, as the inflation rate remains well below the target of the Bank of Japan. The Bank of Japan continues to hold the view that inflation will reach a level of 2% by March 2020. Earlier, Haruhiko Kuroda stated that the Bank of Japan will begin to consider the curtailment of incentive measures in the 2019 fiscal year, which will begin on April 1, 2019.

At its last meeting, the Bank of Japan retained all parameters of the stimulating programs without changes and gave no new signals with regard to exit strategies. The target yield of 10-year government bonds of Japan was left at about zero, and the interest rate was maintained at -0.1%. Thus, the parameters of the monetary policy of the Bank of Japan have not been changing during a year and a half.

One of Kuroda's biggest challenges in his second term as governor is to soften investors to the eventuality of an end to crisis-era policy without frightening markets. BoJ Governor also said, that the fact the BOJ has succeeded in keeping yields low was a sign markets still hold trust in Japan's finances, despite the country's ballooning public debt.

Many members of the Board of the Bank are concerned about speculations on the premature tightening of monetary policy in Japan, especially by foreign investors. Some members of the Board of the Bank of Japan said it was necessary to monitor the side effects of ultra-low interest rates.