Iwata: BoJ may opt to sell bonds or lift deposit rate
Consumer prices in Japan will be influenced by the output gap and inflation expectations in the medium term or longer, said Kikuo Iwata, deputy governor of the central bank. Policymakers acknowledge the yen may weaken more if the interest rate spread with the United States becomes larger, he told lawmakers on Tuesday, but stressed the effect shouldn't be continuous.
The official from the Bank of Japan brushed off the possibility to determine a particular level of inflation where any measures would be rolled out. When time comes for rates to be pushed higher, the top monetary authority could opt to sell government bonds, but that is unlikely in the initial phase, Iwata revealed. He added another way would be to increase deposit rates.
Asked about the exchange rate policy, the deputy governor said the BoJ doesn't lean on weak yen to drive inflation to target 2%. Lower value of the currency may result in a negative impact on economic performances, including a boost to prices of imports, though the effect on long-term inflation isn't clear, according to Iwata.