TOKYO - A gradual change in Japan's monetary policy may lie ahead as the nation emerges from long economic stagnation, a central bank official indicated on Thursday.
The Bank of Japan now keeps a target of 30 trillion yen to 35 trillion yen ($276 billion to $322 billion) for liquidity - commercial banks' account balances at the central bank.
But that target should be lowered in stages, central bank board member Atsushi Mizuno told reporters in Fukushima, northern Japan. Mizuno said that this was his personal view, and that there was no consensus on it among the nine-member policy board.
The more money commercial banks keep in central bank balances, the more extra cash can flow through the financial system - which helps bolster economic recovery.
The Bank of Japan has stuck with a policy aiming for high balances in recent years, as the country fights to emerge from an economic slowdown that lasted more than a decade.
"We can start lowering the account balance target now," Mizuno said on Thursday, giving a possible target level of 15 trillion yen to 20 trillion yen ($138 billion to $184 billion).
After the bank lowers its target level, it should wait three to six months to let financial markets adapt, he said.
If things go well, the Bank of Japan could then possibly raise short-term interest rates - perhaps as early as a year from now - Mizuno said. The central bank has kept interest rates at zero for the last four years in a bid to flood the markets with excess cash.
Last month, the central bank said the accounts could temporarily fall below the target range if necessary - but it officially kept the range unchanged.
At that time, Bank of Japan Gov. Toshihiko Fukui denied that the move reflected a step toward officially lowering the targets or other policy changes. However, Mizuno's comments Thursday appeared to indicate that official changes were possible.
Some economists say the central bank's move last month was an initial step toward tightening of monetary policy.
In recent months, commercial banks' demand for cash has fallen amid ebbing fears of instability in Japan's financial system, making it difficult for the Bank of Japan to maintain its liquidity target band.
On Thursday, commercial banks' account balances at the Bank of Japan had fallen below 30 trillion yen to 29 trillion yen ($276 billion to $267 billion), the central bank said.