BoJ Governor Haruhiko Kuroda told the parliament today that “a mix of fiscal and monetary policy isn’t enough” to boost the economy. It’s also important to “proceed with deregulation and structural reforms to heighten Japan’s medium- and long-term growth potential.”

Kuroda repeated his view that the ultra-look monetary policy could increase the effect of fiscal stimulus. However, he also emphasized “our monetary easing efforts are aimed at achieving our price target, not at helping fund government spending. There needs to be a clear line drawn on this point,”

Executive Director Eiji Maeda told the parliament that “current ultra-loose monetary environment is stimulating the economy by spurring capital expenditure and housing investment.” That will “push up” household income and asset prices. But policymakers are also “mindful” on the “excessive declines” in super-long yields. He warned that could ‘hurt public sentiment and economic activity by lowering the interest life insurers and pension funds earn from their investment”.

BoJ Governor Haruhiko Kuroda said a mix of fiscal and monetary policy measures is a standard way to support the economy. The challenges Japan is facing, including recent natural disasters and impact from overseas slowdown, “should be better be addressed by government with fiscal policy and structural policies”.

On monetary side, the yield curve control of BoJ, which intends to maintain short- and long-term rates quite low, “would make fiscal policy even more effective”. He added, “which intends to maintain short- and long-term rates quite low, would make fiscal policy even more effective.”

BoJ board member Makoto Sakurai, warned in a speech, “in guiding monetary policy, there’s an increasing need to be mindful of the side-effect of continuing our low-rate policy such as that on Japan’s banking system.”

“If there’s a crisis that could disrupt Japan’s financial system,” he noted, “a bold policy response is necessary”. However, ” if the overseas slowdown driven by trade woes is moderate, and the speed at which it affects Japan’s economy is slow, we have room to scrutinise economic indicators in deciding on policy”.

He added, “the next half-year is when we need to carefully scrutinise economic developments”, including the impact of sales tax hike and global slowdown.