Sources: BoJ keeps inflation, not bank pain, as its main policy priority - Reuters

Reuters quotes people familiar with the Bank of Japan (BoJ) matter, as saying that the Japanese central bank is likely to keep inflation as its top policy goal, despite the negative impact of the ultra-loose monetary policy on the small banks.

Key Quotes:

“The BoJ’s priority remains inflation because banking system problems aren’t imminent yet. But that doesn’t mean it can be complacent.” 

“Coming up with the best policy mix is becoming increasingly difficult.”

“The BOJ hasn’t necessarily promised to keep rates at current levels until inflation hits 2 percent.”

“But prices need to tick up a bit more to prompt consideration of action.”

“With half of Japan’s regional banks losing money from their core lending business over the past two years, the BOJ has faced pressure to move away from negative interest rates.

While that has not prompted an immediate policy change, sources say the central bank, as part of its communication strategy, will seek to reassure the market that an exit from crisis-mode stimulus will happen eventually.”