Fairly possible to keep low rates beyond Spring 2020: Kuroda

May 17, 2019

Tokyo--Bank of Japan Governor Haruhiko Kuroda said Friday that it is fairly possible that the central bank will keep interest rates at the current low levels beyond spring 2020, depending on future economic and price conditions.

The remark came after the BOJ said in a policy statement late last month that it intends to "maintain the current extremely low levels of short- and long-term interest rates for an extended period of time, at least through around spring 2020."

"There is a fair possibility that the current low interest rates will be maintained beyond this period, depending on future developments," the BOJ chief said in a speech at a members-only event held by the Research Institute of Japan, a Jiji Press affiliate.

"Japan's economy is likely to continue on an expanding trend ... through fiscal 2021, despite being affected by the slowdown in overseas economies for the time being," Kuroda also said.

Pointing out that the deflationary mindset of Japanese people has been weakening, partly thanks to pay-scale hikes by companies over the last six years, Kuroda stressed that "there is no need to be too pessimistic about the current situation."

At a question-and-answer session after the speech, Kuroda admitted that regional financial institutions have a declining capacity to earn profit against the backdrop of the prolonged BOJ easing policy, as well as the shrinking population.

Kuroda said they need to make efforts to shore up their earning capacity, including through business integrations.

Meanwhile, the BOJ governor rejected so-called modern monetary theory, which calls for tolerating budget deficits, as an "extreme claim" and totally wrong.

"The lessons of history are that (such an idea) would certainly lead to high inflation and cause major economic damage," he stressed. Jiji Press