BOJ to Assess Impact of Higher Crude Oil Prices: Gov. Ueda

Tokyo, March 19 (Jiji Press)–Bank of Japan Governor Kazuo Ueda said Thursday that the central bank will examine how higher crude oil prices would put downward pressure on the domestic economy. The BOJ “placed importance on a newly emerged risk scenario stemming from a rise in crude oil prices,” Ueda said at a press conference after the central bank did not raise its policy interest rate for two consecutive policy-setting meetings at its Policy Board meeting that ended earlier in the day. The governor suggested that the BOJ will carefully assess the impact of the deteriorating situation in the Middle East. The BOJ focuses on the underlying rate of inflation excluding temporary factors when deciding whether to raise interest rates. Regarding future price trends, Ueda noted that they “could fluctuate in either direction,” expressing his view that there are risks on both sides–downward pressure due to an economic slowdown and upward pressure reflecting higher crude oil prices and the yen’s weakening. “We will decide which is more important after watching the situation a little more.” At the latest meeting, the board voted eight to one to maintain the policy of guiding the unsecured overnight call rate, Japan’s benchmark short-term interbank lending rate, to around 0.75 pct. A majority of the nine policy board members placed greater emphasis on upside risks, according to the governor. Regarding future policy management, he said, “We will select the most appropriate response from the viewpoint of realizing the price stability target of 2 pct in a sustainable and stable manner,” after taking into account economic trends. He also said, “Of course, a rate hike is possible” if underlying prices continue to rise even if economic growth slows due to high oil prices. Ueda also revealed that the BOJ is revising the so-called neutral interest rate, which neither stimulates nor restrains the economy. END [Copyright The Jiji Press, Ltd.]