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The BOJ politician rules out the withdrawal of incentives even after the economy has recovered

  • Japan’s recovery will be clearer from the end of the year – Noguchi
  • Low trending inflation means wage and price growth to stay humble
  • Withdrawal of the crisis mode stimulus “not an option” for BOJ

TOKYO, Oct. 14 (Reuters) – The Bank of Japan must maintain its massive incentives as the economy recovers from the blow of the pandemic, board member Asahi Noguchi said, adding to expectations that the country will pull back on policy moves Crisis mode will lag behind.

In a speech, Noguchi sounded cautiously optimistic about Japan’s economic outlook, saying its recovery will become clearer from the end of the year as the introduction of vaccines helps mitigate the effects of the COVID-19 pandemic.

However, Japan’s low trending inflation means that reopening the economy is unlikely to trigger increases in wages and inflation in other advanced countries, he said.

“As a result, undoing monetary easing proposed by other central banks will not be an option for the BOJ,” said Noguchi, who is an advocate of aggressive monetary easing on the nine-member board, on Thursday.

Noguchi also said the BOJ must be cautious in ending a pandemic relief loan program that expires in March as it needs support to the fragile economy, which signals a willingness to argue for a further extension of the deadline.

Downside risks required careful attention due to the proliferation of variants and their impact on automotive supply chains as uncertainty remains high, added Noguchi.

“What is most notable about today’s speech is the fact that Noguchi claimed Japan was different from other countries facing rising inflation,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.

“It is true that global inflation was on the G20 agenda while Japan is stuck in disinflation. Noguchi therefore signaled no immediate need to change monetary policy.”

As part of a policy known as yield curve control (YCC), the BOJ sets short-term interest rates of -0.1% and 10-year bond yields of around 0%. It is also buying government bonds and risky assets to help meet its elusive 2% inflation target.

Years of ultra-loose policies have not boosted inflation, however, as weak consumption keeps businesses from charging more for their goods and services, keeping inflation well below their 2% target.

Reporting by Tetsushi Kajimoto; Editing by Stephen Coates

Our Standards: The Thomson Reuters Trust Principles.

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