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Japan's bitter memories of its decades-long battle with
deflation hang heavily over the central bank's deliberations
over taking a first modest step away from ultra-loose monetary
policy, even as inflation and wages creep up.
Among the side-effects to be weighed will be the effect the
central bank's monetary easing steps had on the banking system,
Ueda told a press conference.
In the review expected to take a year, or 1-1/2 years, the BOJ
will also look at how structural factors like globalisation and
demographics affected Japan's economy and prices, he added.
Ueda unveiled the review plan in April, but offered few details
at the time, beyond saying it would aim to draw lessons from the
BOJ's past experience battling deflation.
Having joined in the deflation battle as a BOJ board member from
1998 to 2005, Ueda knows all too well the danger of a premature
exit from ultra-loose policy.
The BOJ became the first central bank to take short-term
interest rates to zero in 1999, to fend off a domestic banking
crisis and heightening risks of deflation.
After experimenting with quantitative easing and purchases of
risky assets, in 2013 it deployed a massive stimulus programme
under former Governor Haruhiko Kuroda to fire up inflation to
its 2% target in roughly two years.
When the radical asset-buying programme failed to prop up
inflation, the BOJ took short-term rates to negative territory
in 2016 and introduced a cap on the 10-year bond yield.
While such moves helped keep borrowing costs low for companies,
they were criticised by analysts for distorting market pricing
and crushing bank margin.
Many analysts expect Ueda to start phasing out his predecessor's
radical stimulus programme later this year.
(Reporting by Leika Kihara; Editing by Clarence Fernandez)
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