By Leika Kihara and Takahiko Wada
TOKYO – The Bank of Japan must respond flexibly to economic changes caused by the COVID-19 pandemic, its new board member Junko Nakagawa said on Wednesday, a sign she will support the bank’s stance of maintaining its huge stimulus for the time being.
While Japan’s economy appears to be picking up, the central bank must keep monetary policy ultra-loose sustainably, said Nakagawa, former chief executive of Nomura Asset Management.
“The impact of the COVID-19 pandemic continues, so the BOJ must be mindful of downside risks to the economy and prices,” Nakagawa told an inaugural news conference after being officially appointed by the government earlier on Wednesday.
“It’s important that monetary policy responds flexibly with an eye on changes in the economic environment caused by the pandemic,” she said.
Nakagawa replaced Takako Masai, who was the sole female member of the board. She joins a nine-member board that predominantly supports the idea of maintaining ultra-easy policy.
But some on the board are more wary than others about the rising side-effects of prolonged easing, such as the hit to bank profits from years of ultra-low interest rates.
On the BOJ‘s buying of exchange-traded funds (ETF), Nakagawa said the move was part of the central bank’s stimulus policy and having a positive impact on the economy and prices.
Under a policy dubbed yield curve control, the BOJ guides short-term interest rates at -0.1% and 10-year bond yields around 0% via huge bond purchases.
It also buys risky assets like ETFs as part of efforts to reflate the economy and fire up inflation to its 2% target.