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Friday, Bank of Japan Deputy Governor Hirohide Yamaguchi said continuing the special funding measures for a long time would hamper the autonomous recovery of markets and distort resource allocation.
Regarding the withdrawal of stimulus measures, Yamaguchi said the central bank should decide it in line with the improvement in credit. The central bank is seeing a positive mechanism in play in the Japanese economy, he said in Tokyo.
Yesterday, the Policy Board of the BoJ decided by a unanimous vote to maintain the uncollateralized overnight call rate at 0.1%. Upgrading the economic assessment, the bank said economic conditions are showing signs of recovery.
In its monthly report, released on Friday, the central bank said financial conditions in Japan are increasingly showing signs of improvement despite some lingering severity. The central bank's corporate bonds purchase programme is set to expire on December 31.
Earlier this month, a BoJ board member Miyako Suda voiced support for ending extraordinary measures as corporate financing conditions improved recently. We should not underestimate the drawbacks of unconventional steps, the policymaker said.
According to the latest quarterly review of the Bank for International Settlements, central banks might choose different strategies for ending stimulus. The Basel, Switzerland-based institution said various considerations will bear on the choice of the exit path for these central banks, including market functioning, prices and reaction, as well as the run-off of any short-term assets.
On Wednesday, Yukio Hatoyama of the Democratic Party of Japan sworn in as the new prime minister. Hirohisa Fujii was named as the finance minister and Katsuya Okada, former DPJ leader was appointed as foreign minister.
In a news conference on Friday, Fujii said the new government will secure several trillions of yen by suspending wasteful spending in the supplementary budget. He did not mention the exact amount of possible saving.
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