By Leika Kihara
TOKYO (Reuters) -Bank of Japan (BOJ) Governor Haruhiko Kuroda on Monday warned of “very high uncertainty” over the economic outlook and stressed anew the central bank’s readiness to ramp up stimulus as needed to underpin a fragile recovery.
The remarks reinforce market expectations the BOJ will remain an outlier among a global wave of central banks raising interest rates to combat soaring inflation.
“Uncertainty regarding Japan’s economy is very high” given risks such as the COVID-19 pandemic’s impact, Ukraine crisis and rising commodity costs, Kuroda said, adding the BOJ was closely watching the impact currency moves may have on the economy.
“We won’t hesitate to take additional monetary easing steps as necessary” with an eye on risks, Kuroda said in a speech to a quarterly meeting of the central bank’s branch managers.
Kuroda also repeated the BOJ’s policy guidance that the bank expects short- and long-term interest rate targets to “move at current or lower levels.”
In a quarterly report issued on Monday, the BOJ raised its assessment for seven of Japan’s nine regional areas as consumption showed signs of recovery from the pandemic’s hit.
The yen has slid against the dollar on expectations the BOJ will keep monetary policy ultra-loose, widening the divergence between the U.S. Federal Reserve’s aggressive rate hike plan.
The dollar climbed to a 24-year high on the yen on Monday after Japan’s ruling coalition’s strong election result indicated no change to ultra-easy monetary policy.
Under its yield curve control policy, the BOJ pledges to keep short-term rates at -0.1% and the 10-year bond yield around 0% as part of efforts to fire up inflation to its 2% target.
While inflation exceeded 2% for two straight months in May due largely to rising fuel costs, Kuroda has shrugged off the chance of a near-term rate hike on the view such cost-push inflation will prove temporary unless accompanied by higher wage growth.
(Reporting by Leika Kihara; Editing by Christopher Cushing and Sam Holmes)