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While Ueda said there was "still a distance to go" before the
BOJ exits ultra-loose monetary policy, his remarks come at a
time when markets are rife with speculation he will dismantle
his predecessor Haruhiko Kuroda's radical stimulus program.
Speaking at an academic seminar on Saturday, Ueda said the BOJ's
profits will be squeezed when it raises interest rates because
doing so would increase interest rate payments it makes to
financial institutions' reserves parked at the central bank.
But it is also likely to earn higher interest income as its
current government bond holdings are replaced by higher-yielding
bonds, he said, adding it was hard to accurately predict to what
extent a future exit could affect the BOJ's finances.
"The objective of the Bank's monetary policy is achieving price
stability, which is its mission as stipulated by law.
Considerations of the Bank's finances, etc. do not prevent it
from implementing necessary policies," Ueda said in a speech at
an annual meeting of the Japan Society of Monetary Economics.
"A central bank's ability to conduct monetary policy is not
impaired by a temporary decrease in its profits and capital,
provided that it conducts appropriate monetary policy," he said.
Under a policy called yield curve control (YCC), the BOJ guides
short-term interest rates at -0.1% and caps the 10-year
government bond yield around 0% to reflate growth and push up
inflation sustainably around its 2% target. It also maintains a
massive asset-buying program deployed in 2013.
Some academics have warned the BOJ's huge balance sheet will
make an exit from ultra-loose policy difficult by exposing it to
massive losses that could put its credibility on the line.
While inflation has exceeded 2% for more than a year, Ueda has
said the BOJ must keep monetary policy ultra-loose until the
recent cost-driven inflation turns into price rises driven by
solid domestic demand and higher wages.
But he has also said the BOJ will consider an exit when
sustained, stable achievement of its price target is in sight.
(Reporting by Leika Kihara; Editing by William Mallard, Sonali
Paul and Michael Perry)
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