Ueda Says BOJ To Keep Policy Easy In Post-Negative Rate Era

(Bloomberg) -- Financial conditions in Japan will remain easy for the time being even after the Bank of Japan puts an end to the world’s last negative rate regime, Governor Kazuo Ueda said.

“Even if we end minus rates, the accommodative financial conditions will likely continue” based on the bank’s economic outlook, Ueda said in response to questions in parliament Friday.

Ueda’s comments were the latest by bank officials assuring market participants that any end to the negative rate wouldn’t herald a change in the bank’s basic policy stance. BOJ Deputy Governor Shinichi Uchida said Thursday that it’s hard to imagine the bank raising its policy rate continuously and rapidly even after the subzero rate regime comes to an end.

In emphasizing continuity in monetary policy, officials have bolstered prevailing views that Japan’s first rate hike since 2007 is approaching. Ueda reiterated his view that once stable inflation goal comes into sight, the bank will consider whether to end stimulative measures including subzero borrowing costs.

The yen weakened after Uchida’s remarks, which were considered dovish by traders. The currency was little changed at around 149.29 per dollar after Ueda spoke Friday. If the yen weakens beyond the key threshold of 150, market speculation over an early change in the rate might gather steam. Authorities are keen to avoid adding cost-push inflationary pressure on households and small businesses. 

Finance Minister Shunichi Suzuki said earlier Friday that he’ll continue to closely monitor foreign exchange rates while adding that decisions pertaining to specific monetary policies should be left to the central bank.

Most of BOJ watchers expect the ditching of the minus rate in March or April. The bank delivers its next policy decision on March 19. 

(Adds details on market reaction)

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