Bank of Japan Governor Haruhiko Kuroda said on Thursday the central bank can execute a smooth exit from its ultra-loose monetary policy, though doing so “won’t be easy”.
Kuroda repeated his view that the central bank must maintain ultra-easy monetary policy for now, with consumer inflation expected to slow next year and beyond, after speeding up to near its 2 percent target this year because of surging energy costs.
When the right moment comes, the BOJ’s board will plan an exit from its easy policy and lay it out to the public, he said.
“The key would be how to raise interest rates and scale back the BOJ’s expanded balance sheet,” Kuroda told parliament on Thursday.
“The BOJ can combine various means and ensure markets remain stable in executing a smooth exit from easy policy. I must add, however, that it won’t be easy,” he said.
The yen on Thursday briefly strengthened more than half a yen to 126.61 to the dollar. It was last up about 0.4 percent at 126.85.
Kuroda said interest rate hikes by the US Federal Reserve may not necessarily weaken the yen against the dollar further, if they also knock down US share prices.
Prime minister Fumio Kishida told the same parliament session it was hard to say whether the yen’s weakness would be short-lived or become prolonged.
“Sharp yen moves are undesirable. While a weak yen benefits exports and firms with overseas assets, it hurts households and some businesses via higher costs,” Kishida said.