BOJ chief calls for ultra-low interest rates

One of its nine board members recently proposed a idea that has been proposed by TOKYO Bank of Japan Governor Haruhiko Kuroda stressed on Tuesday the need to maintain ultra-low interest rates and brushed aside the possibility of reviewing the bank's monetary policy framework.

The BOJ is trying to achieve its 2 per cent inflation target accompanied by wage growth. This will take more time, and we think it will take more time," Kuroda told parliament.

He said it was premature to talk about specifics about our monetary policy framework.

When asked about BOJ board member Naoki Tamura's comments, Kuroda said that the central bank should review its monetary policy framework and tweak its massive stimulus programme depending on the outcome.

Kuroda said that the BOJ would debate an exit strategy from ultra-loose policy when achievement of 2 per cent inflation comes into sight, and communicate its plan to markets at an appropriate time.

Under yield curve control YCC the BOJ sets a 0.1 per cent target for short-term interest rates and caps the 10 year bond yield around 0 per cent as part of its efforts to achieve its 2 per cent inflation target.

The BOJ's aggressive bond buying in order to defend the yield cap has been criticised by investors as draining bond market liquidity and distorting the shape of the yield curve.

Markets are rife with speculation that the BOJ might change YCC and allow long-term rates to rise more when Kuroda's term ends in April next year.

In October, a 3.6 per cent increase in core consumer prices was driven by soaring import costs and that inflation would slow back below BOJ's 2 per cent target next fiscal year, according to Kuroda.

Kuroda said that the benefits of the BOJ's stimulus still outweigh the costs because of our current ultra-loose monetary policy to make it easier for companies to raise wages.