The Bank of Japan unveiled a plan on Friday to boost funding for fighting climate change, in a surprise move underscoring the importance of the issue for central banks.
The BOJ also maintained its massive monetary stimulus to support the country’s economic recovery and extended a deadline for asset-buying and loan programs introduced last year to channel funds to pandemic-hit firms.
Following are excerpts from BOJ Governor Haruhiko Kuroda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
ON NEW CLIMATE-CHANGE SCHEME
“Japan has pledged to be carbon-zero by 2050. The parliament and government are primarily responsible for measures to achieve this. But climate change has a very big impact on the economy, prices and financial markets in the medium- to long-term … By creating this scheme, we can respond flexibly to changes in the external environment regarding climate change.
“The BOJ will also examine steps on climate change that are not directly related to monetary policy, and will announce the findings at an appropriate timing after our July policy meeting.”
“In Japan, bank lending makes up a large portion of companies’ fund procurement. By creating the climate change scheme, we hope financial institutions will respond to growing corporate needs for funds for this purpose.”
“The pandemic continues to severely affect Japan’s economy, and is exerting big downward pressure on service sectors. It will take some time for the economy to emerge from the pandemic, during which corporate funding will remain under stress.”
“It’s not as if we will buy green bonds in huge amount. But we won’t rule out buying green bonds in the future.”
IMPACT OF RISING RAW MATERIAL COSTS
“Japan’s vaccine innoculation is picking up pace, so at one point, consumers may spend more on services and there could be pent-up demand … That may make it easier for companies to pass on costs. But at this point, that’s not happening easily here as in Europe or in the United States. As the economy recovers steadily, we may gradually see inflation accelerate.”
U.S. FED POLICY’S IMPACT ON BOJ
“In Japan, inflation had not reached 2% even before the pandemic. As such, we must continue with our ultra-loose monetary policy even after the pandemic subsides, in order to achieve our 2% inflation target.
“There’s nothing wrong with central banks’ policies diverging from one another. Each central bank conducts monetary policy in accordance with each country’s economic condition. As for the BOJ, we must sustain our massive stimulus for the time-being to achieve 2% inflation.”
“I have a somewhat brighter outlook on Japan’s economy given that overseas economies have been recovering quite rapidly. On the other hand, the state of emergency curbs continue to weigh on service spending, so we can’t be optimistic altogether … still, vaccine inoculation is speeding up quite a bit. If this continues, there’s a chance that consumption may recover faster than expected. My personal view is that Japan’s economic outlook is more brightening than before.”
BOJ’S ETF HOLDINGS
“Our stance (since the March review) is to buy ETFs more flexibly. We have no plans to terminate ETF buying or sell them now. We also haven’t discussed any ideas on selling ETFs.”
BOJ’S RESPONSE IF YEN FIRMS ON FED TAPERING
“Normally, Fed tapering will push up the dollar against the yen … In any case, there is high uncertainty on how the pandemic affects the economy, so we will ease without hesitation, if required. We have various tools to do so, such as cutting rates and ramping up asset buying.” (Reporting by Leika Kihara; Editing by Sherry Jacob-Phillips)