TOKYO, Feb 24 (Reuters) - Japan's lower house of
parliament is conducting hearings on the government's nominees
for the central bank's two new deputy governors, Ryozo Himino
and Shinichi Uchida.
Himino is former head of Japan's banking sector watchdog,
while Uchida is a Bank of Japan (BOJ) executive. Following are
excerpts from their comments, in Japanese, as translated by
Reuters:
Uchida:
"Domestic and overseas uncertainties regarding Japan's economy
remain very high. Consumer inflation hit 4.2%, well exceeding
the BOJ's 2% target, but this is due mostly to companies passing
on higher raw material costs to households...
"It's necessary to support Japan's economy by maintaining
the current ultra-loose policy.
"While the ultra-loose policy is having a negative impact on
financial institutions' profits, the overall benefits of
stimulus are exceeding the costs.
"Instead of reviewing the ultra-loose policy just because
there are side-effects, the BOJ must come up with ideas to
mitigate the cost and sustain the policy."
ON WHETHER END TO NEGATIVE INTEREST RATES WILL BE DISTANT
"The BOJ's current interest rate target levels, including the
negative short-term rate, are appropriate. If Japan can foresee
inflation reaching 2%, the target levels could be reviewed. But
that won't come immediately."
ON BOJ'S EXIT POLICY
"It's premature to discuss an exit because we can't foresee
inflation sustainably and stably achieve 2% yet. As for a future
exit, the key would be how to adjust interest rates and its huge
balance sheet. In what order the BOJ does this, and at what
pace, will depend on market conditions at the time.
"I have been involved in the drafting of the BOJ's current
policy, and I can say we thought about an exit strategy when we
introduced the ultra-loose policy. So, it's possible for the BOJ
to exit smoothly regardless of economic, price and market
conditions at the time."
ON SIDE-EFFECTS OF YIELD CURVE CONTROL
"The biggest side-effects could be the impact on financial
institutions and markets... We hope to come up with ways to
mitigate such side-effects as much as possible.
"If I were to be approved as next deputy governor, I hope to
come up with various ideas on policy... At present, I hope to
put YCC at the centre of our easy monetary policy."
Himino:
"We must achieve the inflation target sustainably and stably
along with wage hikes.
"We need to carefully monitor financial intermediation and
side-effects of easing in addition to the economy and prices.
"We're not in a situation where we have specific concerns
over Japan's financial system stability ... But we must
carefully monitor the situation to look out for potential
financial imbalances or vulnerabilities.
"The BOJ's mandate is to achieve price and financial
stability. My role will probably be focused more on the latter.
But in pursuing price stability, the effect of the BOJ's
monetary policy steps will be transmitted via a sound financial
system. I hope to look closely at what is happening with the
transmission channel of monetary policy.
"Uncertainty regarding overseas economies is very high, so
we need to closely watch the impact on Japan's economy. At
present, it's important to maintain the current ultra-easy
policy.
"For now, the benefits of ultra-easy policy are exceeding
the cost, so it's important to sustain the current policy ...
There are various possibilities. As such, the BOJ must consider
various scenarios and respond flexibly on policy as needed.
"I don't think it's immediately necessary to change language"
(on the BOJ's joint statement with the government).
(Reporting by Leika Kihara; Editing by Subhranshu Sahu)
Messaging: leika.kihara.reuters.com@reuters.net))
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