MNI: BOJ Will Not Hike During Unstable Markets - Uchida

Bank of Japan Deputy Governor Shinichi Uchida said on Wednesday that the BOJ will not raise its policy interest rate while financial and capital markets are unstable.

“In contrast to the process of policy interest rate hikes in Europe and the United States, Japan's economy is not in a situation where the BOJ may fall behind the curve if it does not raise the policy interest rate at a certain pace,” Uchida told business leaders in Hakodate City. “Therefore, the Bank will not raise its policy interest rate when financial and capital markets are unstable.”

"Since recent developments in financial and capital markets at home and abroad have been extremely volatile, the Bank is monitoring developments in these markets and their impact on economic activity and prices with utmost vigilance, and it will conduct monetary policy as appropriate. Let me reiterate my view that the Bank needs to maintain monetary easing with the current policy interest rate for the time being."

Uchida said the BOJ is monitoring recent volatile markets and their impact on economic activity and prices "with utmost vigilance, and it will conduct monetary policy as appropriate.”

U.S. SOFT LANDING

Uchida also said that the U.S. economy will most likely have a soft landing and that the rise in Japanese stock prices is attributable to the improvement in corporate profitability.

“Since it is unlikely that there have been significant changes in economic fundamentals in both countries, the reaction to the U.S. economic indicators for a particular month seems too large,” Uchida said.

He repeated remarks made by Governor Kazuo Ueda that developments in economic activity and prices as well as financial conditions will drive future policy decisions.

“If the aforementioned outlook for economic activity and prices will be realised, the Bank will accordingly continue to raise the policy interest rate and adjust the degree of monetary accommodation,” Uchida said. "It should be noted that this approach is conditioned by the phrase ‘if the outlook for economic activity and prices will be realised.'"

He added a policy interest rate of about 0.25% is significantly low, "not only in nominal terms but especially in real terms.”

The Bank will therefore continue to support the economy by maintaining highly accommodative financial conditions, he said.