A Bank of Japan deputy governor on Friday remained noncommittal on whether the central bank would lift its "zero-interest-rate" policy in its next policy-setting meeting, scheduled for Aug. 11, saying it needs to monitor the effects of Sogo Co.'s collapse on market sentiments.
In a closely watched speech to journalists a week ahead of the BOJ's next Policy Board meeting, Yutaka Yamaguchi reiterated the bank's stance that the nation's economy is on a moderate recovery path.
The bank voted to keep the current policy unchanged in its last policy board meeting July 17, a few days after department store operator Sogo suddenly gave up efforts to rebuild its management on its own and filed for court protection from creditors.
Yamaguchi said the bank is still assessing the effect of Sogo's collapse. "At the moment, we need to closely monitor whether there is the risk that the market may suddenly turn nervous," he said.
In response to the various arguments for and against the end to the "zero-rate" policy, he conceded that private consumption has not fully recovered and that the current economic upturn is mostly limited to the corporate sector. But he hinted that the bank will be able to end the policy even before it confirms a full recovery in private consumption, employment or household income levels.
"I think that if household income recovers even moderately, there is a higher probability that the economy will return to a growth path led by business-fixed investment," Yamaguchi said.
Yamaguchi is a key figure on the nine-member policy board and is seen to be keen to abandon the "zero-rate" policy.