TOKYO — Bank of Japan (BoJ) Deputy Governor Masazumi Wakatabe said he saw the benefits of ultra-loose monetary policy still outweighing the costs, signalling his preference for maintaining a massive stimulus program to prop up inflation to the central bank’s target.

Years of heavy money printing by the BoJ have pushed down long-term interest rates near zero, adding to the squeeze on margins for Japan’s regional banks already suffering from a dwindling population and a lack of fund demand.

Wakatabe, however, defended the BoJ’s stimulus program, saying it has created jobs, boosted economic growth and put an end to a period when consumer prices continued to decline.

“When I look at developments since we introduced quantitative and qualitative easing (QQE), the outcome is clearly positive,” he said, referring to the BoJ’s decision to adopt a massive asset-buying program in 2013.

“There is debate about what to do with the demerits of prolonged monetary easing. But I still feel the benefits of QQE outweigh the costs,” Wakatabe told parliament on Thursday.

After years of huge asset buying failed to fire up inflation to its 2% inflation target, the BoJ added yield curve control (YCC) to QQE. Under the policy, it now guides short-term rates at minus 0.1% and long-term yields around zero percent.

Wakatabe said he expects the yield curve to steepen once Japan emerges from deflation, as markets price in expectations that inflation will accelerate.

“Our biggest mandate is to achieve price stability,” Wakatabe said. “We will do our utmost to maintain financial stability. But we are adopting YCC with QQE for the purpose of ending deflation,” he said.

Japan’s core consumer prices rose 0.8% in March from a year earlier, still distant from the BoJ’s target. — Reuters

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