BOJ has no need to modify ultra-easy policy, says deputy gov Amamiya By Reuters2 min read

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© Reuters. FILE PHOTO: A man wearing a protective mask stands in front of the headquarters of Bank of Japan amid the coronavirus disease (COVID-19) outbreak in Tokyo, Japan, May 22, 2020.REUTERS/Kim Kyung-Hoon/File Photo

By Leika Kihara

TOKYO (Reuters) -Bank of Japan Deputy Governor Masayoshi Amamiya said on Wednesday there was no need for the central bank to tweak its ultra-loose policy with inflation “well below” its 2% target.

While Japan’s economy is likely to recover more clearly next year as supply constraints subside, the spread of the Omicron new COVID-19 variant clouds the outlook, Amamiya said.

Still, subdued price growth means Japan faces a different situation than the United States and Europe, where rising inflation heightens the chance of an unwinding of ultra-loose monetary policies, he told a speech.

“In light of Japan’s price situation, you can see the BOJ for now has no need to modify its massive monetary stimulus programme,” Amamiya said.

Amamiya, however, said inflationary pressures were gradually heightening even in Japan with more companies being able to pass on higher costs to consumers.

Improvements in corporate funding conditions were also broadening, allowing companies to issue corporate bonds and commercial paper more easily, he added.

“Corporate funding conditions are improving as a whole, although they remain severe for some small firms,” Amamiya said.

“We’ll make an appropriate decision looking at developments on corporate finance, including the BOJ’s December tankan business sentiment survey,” he said.

The BOJ ramped up purchases of corporate bonds and commercial paper, and introduced a loan scheme aimed at channelling funds to small firms via financial institutions last year to combat a cash crunch caused by the pandemic.

The recent spread of the Omicron new variant complicates the BOJ’s decision, expected to be made as early as next week’s rate review, on whether to phase out the programmes when they reach their current deadline in March 2022.

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