The Bank of Japan does not need to expand monetary stimulus immediately if the market turbulence caused by Britain’s vote to leave the European Union proves temporary, a former central bank executive said on Monday.
But Japan holds the right to intervene in the market to stem sharp yen rises based on a shared understanding among G7 and G20 nations that excessive currency moves are undesirable, said Kazuo Momma, who was the BOJ’s executive director overseeing international affairs until May.
“You can’t conduct intervention easily. But there’s a shared understanding (among G7 and G20 nations) that if necessary, countries can step into the market,” Momma told Reuters in an interview.
If the BOJ were to expand stimulus, increasing purchases of risky assets may be an easier option than topping up government bond buying or pushing interest rates deeper into negative territory, said Momma, who is now an executive economist at Mizuho Research Institute.