MNI POLICY: Kuroda: BOJ Won't Raise Rates Before Fed Hikes

     TOKYO (MNI) - Bank of Japan Governor Haruhiko Kuroda said Tuesday that the

BOJ will not be able to raise its policy interest rates before the U.S. Federal

Reserve hikes its federal funds rate.

     When asked about market view that the BOJ will not be able to raise

interest rates before the Fed raises its policy rate, "Honestly speaking, I

think so," Kuroda told reporters, indicating that the BOJ will remain on hold

for a prolonged period.

     The Fed said last week it expected no rate increase at least through 2022

and Kuroda said there was little chance of a BOJ hike in either FY21 or FY22.

     Kuroda also said an excessive flattening yield curve is undesirable as it

will lower returns on investment for life insurance firms and pension funds.

     The BOJ is aimed at maintaining the yield curve at low levels amid upward

pressure on bond yields caused by an increase of government bond issuance, he

added.

     Kuroda also said that the BOJ will not rule out all possible additional

measures and will conduct additional easing if necessary in a flexible manner,

without hesitation.

     --EXPANDED PROGRAMS

     He cited expanding the special program, such as the purchases of commercial

paper and straight bonds, and the lending facility, lowering short- and

long-term interest rates and expanding the purchases of ETFs.

     Kuroda admitted that the momentum toward achieving the 2% price target is

temporarily lost but the BOJ stuck to the achievement of the 2% target.

     He noted that solid stock prices around the globe are reflecting the view

that corporate profits, which fell recently due to the spread of the

coronavirus, will increase in the future, although he warned that volatility in

stock market remains high and the BOJ keeps a close eye on developments of

financial markets.

     The biggest concern, he said, is that the infection continues increasing 

in both developing countries and emerging economies. Kuroda maintained the view

that Japan's economy is expected to gradually improve as coronavirus wanes and

the global economy will gradually improve in the second half of this year.

     But he emphasized high uncertainties over the outlook for the coronavirus

and warned the risk that the coronavirus may be prolonged more than generally

expected and the BOJ must then pay attention to its impact on financial markets.

--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com

--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com

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