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Governor Haruhiko Kuroda’s relative optimism over the economy suggests that keeping interest rates where they are now is the main scenario for the Bank of Japan rather than lowering them further.The central bank last week baked into its policy pledge an expectation that rates will stay low or go lower, strongly hinting that it would use its negative rate to support the economy and prices should circumstances deteriorate. More than 70% of economists surveyed before the meeting forecast the bank to take additional easing action by January.
Speaking to business leaders in Nagoya on Tuesday, Kuroda said that the latest policy guidance showed the BOJ was tilted toward taking easing action, but he painted a picture of a global economy that is over the worst, in comments that suggest lower rates aren’t looming.Kuroda said the bank did not expect any further deceleration of the global economy. He also flagged green shoots of a recovery in the world tech sector. The speech follows bullish remarks on the strength of Japan’s domestic economy after last week’s meeting.Given that the BOJ concluded at the meeting that there had been no increase in the risk of the global slowdown wiping out price momentum in Japan, the implication is that rates aren’t going down without a clear worsening of the economy, prices or financial markets.Kuroda also said that the BOJ had other stimulus options besides the negative rate. Having spent much of September and October creating the impression that the interest rate trigger was a live option, that comment suggests he is now making another baby step away from pulling the trigger on rates for now.