By Leika Kihara
WASHINGTON (Reuters) – Bank of Japan Governor Haruhiko Kuroda said on Friday the central bank was ready to expand monetary stimulus if needed, brushing aside the view the BOJ had little ammunition left to fight the next economic downturn.
“It might be the case that central banks have less room to cut interest rates than before. But that doesn’t mean central banks have no ammunition left to respond to financial developments,” Kuroda told a news conference after the Group of 20 finance leaders’ meeting.
“The BOJ also has room to ease monetary policy further if doing so becomes necessary,” he said.
Kuroda also said he has no plans now to change the central bank’s forward guidance, or the message it sends to signal its policy intentions to financial markets.
“Our forward guidance was introduced to clarify our stance of patiently maintaining powerful monetary easing,” Kuroda said.
“I think that stance is understood well by market players. In that sense, our forward guidance is showing its intended effect,” he said.
Under a policy dubbed yield curve control (YCC), the BOJ guides short-term interest rates at minus 0.1 percent and the long-term yield around zero percent.
In July last year, it introduced a forward guidance pledge to keep interest rates very low for an “extended period” – language some critics have said is too vague.
(Reporting by Leika Kihara; Editing by Tom Brown)