(Reuters) - The Bank of Japan kept ultra-low interest rates on Friday but decided to start trimming its huge bond purchases in a slow but steady retreat from its massive monetary stimulus.
While it will continue to buy government bonds at the current pace of roughly 6 trillion yen ($38 billion) per month, the central bank decided to lay out details of its tapering plan for the next one to two years at its July meeting.
Following are excerpts from BOJ Governor Kazuo Ueda's comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:
ON TAPERING BOND BUYING
"In trimming bond buying, it's important to leave flexibility to ensure market stability, while doing so in a predictable form. The size of reduction will likely be significant. But specific pace, framework and degree will be decided upon discussions with market participants."
"As we reduce bond buying, the BOJ's bond holdings will decrease. But the stock effect of our holdings will continue to exert an effect on the economy."
"We don't have a specific timeframe in mind on how long it will take for us to (sufficiently) reduce our balance sheet. We decided to start with a timeframe of roughly one to two years."
ON MONETARY POLICY SUPPORT
"If underlying inflation accelerates in line with our forecast, the BOJ will consider adjusting the degree of monetary support. If the economy and inflation overshoots our forecast, that will also be reason to raise interest rates."
ON TIMING OF INTEREST RATE HIKE
"We will make a decision looking at economic and price developments. We will of course take into account how our bond tapering will proceed."
ON YEN'S WEAKNESS
"Exchange rate moves would have a big impact on the economy and prices. Recently, the effect on prices likely heightened because of changes in corporate wage- and price-setting behaviour. Recent yen falls have an effect of pushing up prices, so we are closely watching the moves in guiding policy."
"We are looking at currency volatility, sustainability of the moves and how it affects prices and wages. That's something we will look at daily and at each policy meeting."
ON RECENT RISE IN 10-YEAR BOND YIELD OF AROUND 1%
"We've seen long-term inflation expectations heighten recently. As such, the real long-term interest rate level remains quite low. We still have a sufficiently accommodative financial environment."
ON CONSUMPTION
"We expect wages to rise moderately and inflation to moderate. As such, we are sticking to our view that real household income will gradually increase and lead to stronger consumption."