BOJ’s Kuroda rules out near-term rate hike

By Leika Kihara

TOKYO (Reuters) – Bank of Japan Governor Haruhiko Kuroda on Tuesday ruled out the possibility of raising interest rates any time soon despite his optimism over the economic outlook, stressing that inflation remained too low to justify withdrawing stimulus.

Kuroda also said he saw no big problem emerging from the BOJ’s purchases of exchange-traded funds (ETF), suggesting that the bank will maintain the current pace of purchases.

“Japanese inflation hasn’t even reached 1 percent. As such, it’s inappropriate to prematurely shift monetary policy just to create future policy space,” Kuroda told parliament.

“It’s inappropriate to raise our 10-year government bond yield target now, even by a small margin,” he said.

Global bond yields have risen and stock prices have sank on investors’ concern that major central banks will roll back crisis-mode stimulus earlier than expected.

Kuroda said the fundamentals behind stock prices remained solid as the Japanese, U.S. and European economies were in “very good shape.”

“The recovery (in these economies) is broadening across sectors and the outlook remains good as a trend,” he said, adding that the central bank was carefully watching financial market developments.

Under a policy dubbed yield curve control (YCC), the BOJ guides short-term interest rates at minus 0.1 percent and the 10-year bond yield around zero percent to achieve its 2 percent inflation target.

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