MNI: BOJ Wakatabe: Policy Mix Vital; Must Avoid Real Rate Rise

Bank of Japan Deputy Governor Masazumi Wakatabe said Wednesday the central bank will need to maintain the current monetary and fiscal policy mix to beat years of deflation regardless of who become the new prime minister.

"I will not comment on political issues, but the current monetary policy is appropriate" and the BOJ, along with the government, will continue to fight the coronavirus pandemic, Watakabe told members of the press. Earlier in the day, Watakabe spoke to business leaders in Saga City via an online conference.

In the speech, he said that the BOJ must think hard about what kind of monetary policy should be used in the Covid-19 era, referencing discussions being held by other central banks globally at present.

Wakatabe told reporters that one option is that the BOJ should pay more attention to employment and income in managing monetary policy. "Employment and income have been hit by the coronavirus, and the BOJ may need to pay attention to them than before," he said.

However, he quickly downplayed any shift, saying, "I don't explicitly think about them now."

RATE POLICY

Wakatabe also said that he sees no need to review the negative interest rate policy now, adding that the BOJ should avoid a sharp rise in real interest rates to be caused by weaker inflation rates.

As for real interest rates, Wakatabe said, "I'm more focused on medium- to long-term inflation expectations, (which strongly affect real interest rates)."

If real interest rates rise, the BOJ can lower real interest rates through a combination of nominal interest rates and asset purchases, which will affect real interest rates, Wakatabe said.