(Bloomberg) -- When the Bank of Japan is finally ready to signal the start of an exit from its massive monetary stimulus, the shift will be seen in its target rate, Governor Haruhiko Kuroda said in an interview.
While he stressed that policy settings will remain at their current rock bottom levels for now, the comments on what an exit will one day look like were among his clearest yet.
“When 2 percent inflation target is met or is close to be met, of course we can change the target, the monetary operating target of interest rate,” Kuroda said when asked in an interview with Bloomberg television how the central bank would signal an exit. “At this moment, inflation is only 1 percent, so we will continue the current yield curve control at the current level of interest.”
When asked in a follow-up question to confirm if a change in the interest rate would be a definite signal of a policy shift, he said: "That’s right."
Sporting a batik shirt on the sidelines of the International Monetary Fund’s annual meetings in Bali, Indonesia, Kuroda said a continuation of recent wage gains would be "critical" in the BOJ’s quest to reach its inflation target of 2 percent.
While the U.S. tightens monetary policy and Europe inches toward normalization, the BOJ remains a long way from ending its massive monetary easing program. In July, Kuroda and his board made the most significant tweaks to their policy framework in two years in a bid to give them more flexibility as they prepare for continued stimulus.
--With assistance from Kelly Belknap.
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