On Monday, Bank of Japan Governor Haruhiko Kuroda said it was too early to think about normalising monetary policy, confirming the belief that the Japanese central bank will lag behind other central banks in reducing monetary stimulus.
The Bank of England became the first G7 central bank to raise interest rates last week, and the Federal Reserve and the European Central Bank (ECB) have moved away from monetary support.
As of September 2021, the BoJ's assets had risen to the equivalent of 135% of GDP, considerably above the Fed's 36% and the ECB's 66%, according to Kuroda, who promised to conduct appropriate policy while considering the BoJ's financial health.
"I do not believe that expanding the BoJ's assets will have an impact on our ability to maintain monetary policy and financial system stability," Kuroda said.
With consumer inflation in the US approaching 7% and in the Eurozone approaching 5%, the Fed has begun tapering and plans to end it around March of next year, Kuroda said.
Consumer prices in Japan have remained steady, and even when one-off factors like lowering mobile phone fees are considered, the CPI is anticipated to be around 0.5%, he noted.
"The 2% inflation target is still a long way off. It is still too early to discuss policy normalisation" Kuroda explained. "In comparison to Western countries, inflation is very low, and inflation expectations remain very low. We're in a phase when large-scale monetary easing will be patiently continued."
Kuroda also stated that the government must maintain market confidence in Japan's fiscal health over the medium to long term in order for the BoJ to conduct appropriate policy under stable JGB yield formation.