Haruhiko Kuroda: The Bank's Semiannual Report on Currency and
Monetary Control
Statement by Mr Haruhiko Kuroda, Governor of the Bank of Japan, before the Committee on
Financial Affairs, House of Councillors, Tokyo, 13 May 2021.
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Introduction
The Bank of Japan submits to the Diet its Semiannual Report on Currency and Monetary
Control every June and December. I am pleased to have this opportunity today to talk about
recent economic and financial developments and present an overall review of the Bank's conduct
of monetary policy.
I. Economic and Financial Developments
I will first explain recent economic and financial developments.
Japan's economic activity has been pushed down recently, mainly in the face-to-face services
sector, such as eating and drinking as well as accommodations. This is because public health
measures have been implemented, such as the state of emergency declared in some regions,
amid the novel coronavirus (COVID-19) spreading along with an increase in variant cases. On
the other hand, exports and production have continued to increase on the back of overseas
economies recovering on the whole. Business fixed investment has picked up due to
improvement in corporate profits. In sum, Japan's economy has picked up as a trend, although it
has remained in a severe situation due to the impact of COVID-19. With regard to the outlook,
although the level of economic activity, mainly in the face-to-face services sector, is expected to
be lower than that prior to the pandemic for the time being, the economy is likely to recover, with
the impact of COVID-19 waning gradually and supported by an increase in external demand,
accommodative financial conditions, and the government's economic measures.
The year-on-year rate of change in the consumer price index (CPI) has been slightly negative
and is likely to remain so for the time being, mainly affected by COVID-19 and a reduction in
mobile phone charges. However, when excluding the effects of temporary factors that push
down prices, it has been slightly positive. Regarding the outlook, the year-on-year rate of change
in the CPI is expected to turn positive and then increase gradually on the back of economic
activity continuing to improve and the effects of the temporary factors dissipating.
Risks to the aforementioned outlook for economic activity and prices are skewed to the downside
for the time being. The consequences of COVID-19 and their impact on the economy are
unclear. In addition, it is likely that growth expectations will not decline substantially and financial
system stability will be maintained, but this outlook also entails uncertainties. Regarding financial
risks from a longer-term perspective, there is a possibility that prolonged downward pressure on
financial institutions' profits may lead to a gradual pullback in financial intermediation. On the
other hand, the vulnerability of the financial system could increase, mainly due to the search for
yield behavior. Therefore, it is necessary to pay close attention to future developments.
II. Conduct of Monetary Policy
Next, I will explain the Bank's conduct of monetary policy.
In March, the Bank conducted the Assessment for Further Effective and Sustainable Monetary
Easing. Based on the findings, the Bank judged it important to continue with monetary easing in a
sustainable manner and make nimble and effective responses to counter changes in the
situation, with a view to achieving the price stability target of 2 percent. It therefore decided mainly
on the following three policy actions.
First, the Bank established the Interest Scheme to Promote Lending so that it could cut
shortand long-term interest rates nimbly while taking into consideration the functioning of financial
intermediation. Second, in order to conduct yield curve control flexibly during normal times, the
Bank made clear that the range of 10-year Japanese government bond (JGB) yield fluctuations
would be between around plus and minus 0.25 percent from the target level of around zero
percent. At the same time, it introduced "fixed-rate purchase operations for consecutive days" as
a powerful tool to set an upper limit on interest rates when necessary. Third, with regard to the
purchases of exchange-traded funds (ETFs), the Bank decided to maintain the upper limit -
which was originally set as a temporary measure in response to the impact of COVID-19 - of
about 12 trillion yen on the annual pace of increase in its amount outstanding even after
COVID19 subsides and to conduct the purchases as necessary with this upper limit while taking into
account market conditions.
Under Quantitative and Qualitative Monetary Easing (QQE) with Yield Curve Control, of which
sustainability and nimbleness have been enhanced owing to these policy actions, the Bank will
persistently continue to conduct powerful monetary easing with a view to achieving the price
stability target of 2 percent.
On this basis, it is important to address the impact of COVID-19 for the time being, and thus the
Bank will continue to support financing, mainly of firms, and maintain stability in financial markets
through monetary easing measures such as the Special Program to Support Financing in
Response to the Novel Coronavirus (COVID-19).
Thank you.