TOKYO (Reuters) - The Bank of Japan can heighten inflation expectations by patiently maintaining its ultra-easy policy, deputy governor Masazumi Wakatabe said, in a sign the reflationist-minded newcomer won’t call for additional stimulus any time soon.
Wakatabe also said he was mindful that the risks of prolonged easing, such as the damage that years of low rates inflict on financial institutions’ profits, could accumulate.
“The merits and demerits of the BOJ’s monetary policy change over time,” Wakatabe told parliament on Monday.
“We need to be mindful of the danger, or risk, a prolonged low-interest rate environment would weigh on bank profits and that such impact could accumulate,” he said.
A former academic known as a vocal advocate of aggressive easing, Wakatabe had said in the past that the BOJ should act as consumer prices were not rising quickly enough.
That has led some analysts to speculate that Wakatabe, who joined the BOJ board last month, could propose ramping up stimulus in coming months.
During Monday’s appearance, however, Wakatabe said the BOJ’s current easing has already brought many benefits to the economy, such as creating jobs.
“Inflation has yet to reach our 2 percent target but price growth is on an upward trend,” Wakatabe said.
“By patiently maintaining our current policy, we can heighten inflation expectations” that will lead to a natural increase in longer-term rates, he said.
Wakatabe said the BOJ had the tools to either expand and dial back stimulus, brushing...