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In
his inaugural news conference, Nakamura also said Japan would
not see inflation pick up sustainably unless economic conditions
allowed for the central bank to abandon negative interest rates.
"Looking at Japan's current economy, we can say it's in a pretty
severe situation," Nakamura said. "It's important to respond
early to economic developments, with an eye on conditions
regarding the coronavirus pandemic," he said.
A former executive at electronics giant Hitachi <6501.T>,
Nakamura joined the BOJ's nine-member board on Wednesday,
succeeding former auto executive Yukitoshi Funo.
Japan is mired in recession as the pandemic hit exports and
consumption, forcing the BOJ to ditch its efforts to achieve its
elusive 2% inflation target for now and focus on supporting the
economy.
Nakamura said with demand "evaporating," it was not the right
time to consider abandoning negative interest rates.
But he said Japan was forced to adopt negative rates because
aggressive money printing by the BOJ failed to boost demand.
"Unless Japan returns to a situation where we can abandon
negative rates, it won't see (sustained) inflation," he said,
signalling that the BOJ should eventually seek to pull rates out
of negative territory.
The BOJ loosened monetary policy in March and April focusing on
steps to ease funding strains for companies hit by slumping
sales from the pandemic.
The central bank has held off on deepening negative rates from
the current -0.1% or cutting its 0% long-term rate target,
partly on concerns over eroding financial institutions' margins.
(Reporting by Takahiko Wada, Writing by Leika Kihara; Editing by
Jacqueline Wong)
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