TOKYO (AFX) - Bank of Japan governor Masaru Hayami said he has no plan to immediately employ a new fund injection approach, although he ordered BoJ staff to examine ways to improve liquidity provision into the capital markets.
"It is not that I plan to immediately employ (a new approach)," Hayami said.
"My main motivation is that when there is uncertainty over the prospects for overseas economies and equity markets, we just want to prepare some policy options that we can take when the risk arises." However, he added that if there are good policy options, "it is not too strange to use them immediately".
Hayami also ruled out the immediate possibility of returning to the zero call-rate policy, saying: "I have no such plan."
He described the policy of maintaining the overnight call-rate at zero as "irregular," adding that it goes against the nature of capitalism.
Similarly, there are no immediate plans to introduce quantitive monetary easing measures, Hayami said, although he aims to ensure a stable functioning of the financial markets.
"By doing so, we can maximise the effects of a relaxed monetary policy," he added.
The central bank will maintain its present policy of supporting the sustained recovery of the economy but will focus on the downside risks that may stem from unstable movements of the global capital markets and economies.
"Given this environment, I think it is a good time for us to examine whether the current approach (of fund injection into the capital market) is appropriate and to examine if there is any other way to improve this," Hayami said.
He said the bank does not plan to steer its monetary policy only to prop up falling share prices.
"It is not appropriate and it is difficult to guide share prices to certain levels just with monetary policy. Central bankers in all countries share this view," he said.
Despite the recent falls in share prices, which have created concerns over the health of the banking system, the situation has improved notably, Hayami said.
"The bad-debt problem has not completely settled down and share prices may (adversely) affect management of banks, but the very fact that there is debate over the need for recapitalization is overdone," he said.
He added that the BoJ will monitor carefully how recent falls in share prices affect the health of the banking system, as leading banks still hold "an additional 20 trln yen in loan assets that need to be written down".
Hayami said that, while the ruling Liberal Democratic Party is speeding up deliberations on stockmarket supportive measures, "it is not an orthodox approach to directly try to halt the falls in share prices".
"The universal rule here is to revive the economy and increase corporate profits," he said.
Hayami said he hopes for an autonomous correction of the weak yen. "Eventually the markets will think calmly and (any overdone movement) will settle down, so I think and hope," he said.
"If the sales of shares by foreign investors and related movements were accelerating the yen's weakness, then that is not welcome."