BoJ Governor Haruhiko Kuroda said in a speech that the economy is “still on its way to recovery from the pandemic and has been under downward pressure from the income side due to rising commodity prices”. In this situation, “monetary tightening is not at all a suitable measure”.

He added that the top priority is to “persistently continue with the current aggressive monetary easing centered on yield curve control”. And, unlike other central banks, BoJ has noted faced the “the trade-off between economic stability and price stability”. Hence, it’s “certainly possible for the Bank to continue stimulating aggregate demand from the financial side.”

He concluded that BoJ “will take a strong stance on continuing with monetary easing, in that it will provide a macroeconomic environment where wages are likely to increase so that the rise in inflation expectations and changes in the tolerance of price rises — which have started to be seen recently — will lead to sustained inflation.”

Full speech here.

BoJ board member Seiji Adachi said, “with the impact of the pandemic continuing, shifting to tighter monetary policy now would inflict huge damage to business and household activity… It’s premature to move toward tighter policy.”

“If the bank uses monetary policy to respond to short-term fluctuations (in exchange rates) before achieving its goal for underlying inflation, it would bring negative effects on the Japanese economy,” he said.

“We should not forget that a strong yen was among factors that led to Japan’s prolonged deflation and two ‘lost’ decades” of economic stagnation, he added.