BOJ Governor Kuroda’s comments at news conference

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The Bank of Japan raised its inflation forecast on Thursday, but maintained ultra-low interest rates and warned of risks to the economic outlook in a sign it will remain an outlier among a global wave of central banks tightening monetary policy.

As widely expected, the BOJ kept unchanged its -0.1% target for short-term interest rates, and 0% for the 10-year government bond yield by a 8-1 vote.

In fresh quarterly projections, the BOJ raised its core consumer inflation forecast for the current fiscal year ending in March 2023 to 2.3% from 1.9% projected in April.

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It expects core consumer inflation to hit 1.4% in fiscal 2023, compared with 1.1% in April. The board cut its economic growth forecast for the current fiscal year to 2.4% from a 2.9% rise seen three months ago.

Following are excerpts from BOJ Governor Haruhiko Kuroda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:

RECENT YEN WEAKNESS

“What’s important is for companies that saw profits increase from weak yen boost capital expenditure and raise wages. That will help strengthen a positive cycle in which rising income leads to higher spending. When we’re seeing rapid currency moves like now, companies may become hesitant of increasing capital expenditure. Sharp yen declines are therefore undesirable. We will work closely with the government, and monitor currency moves and their impact on the economy carefully.”

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RISING PRICES

“It’s true our core-core inflation forecast for fiscal 2024 remains unchanged. But the process at which inflation will pick up is somewhat more upbeat than in April. We expect companies to continue passing on costs to households … What’s noticeable is that inflation expectations are rising quite a bit for short-term, and also heightening for medium- and long-term zones. However, we don’t expect core-core inflation to immediately hit 2%.”

BOND YIELD TARGETS

“We have absolutely no plan to raise our yield targets. We also have no plan to widen the band around our yield target. The economy is in the midst of recovering from the pandemic. Japan’s worsening terms of trade is also leading to an outflow of income, which adds to the economy’s burden. As such, we must continue with our easy policy to ensure rising corporate profits lead to moderate wage and price growth.”

(Reporting by Leika Kihara; editing by Rashmi Aich)