TOKYO — The governor of Japan’s central bank on Wednesday warned that protectionist trade policies are a growing risk for the global economy.
Speaking after the BOJ kept monetary policy unchanged, Haruhiko Kuroda said that nationalistic economic policies could put the global supply chain at risk.
“The multilateral trading system is complex,” Kuroda said. “Not only the North American Free Trade Agreement, or trade between the U.S. and China, but the effect on the whole world economy must be watched.”
He added that sudden falls in emerging market currencies such as the Turkish lira or the Argentine peso were also a concern.
Even so, he said that damage from protectionism had so far been limited. He cited the International Monetary Fund, which sees the global economy growing at a healthy clip of 3.9% in 2018 and 2019.
The governor remained optimistic on Japan, while touching on the impact of the recent earthquake in Hokkaido on the world’s third-largest economy.
“Infrastructure and production facilities were damaged by the disaster, but they are recovering quickly,” Kuroda said. “But there are concerns over tourism with many reservations being canceled. We need to monitor how such a movement will last.”
Earlier in the day, seven out of nine BOJ board members voted to maintain the bank’s short-term interest rate at minus 0.1%, and long-term rates around 0%.
The bank also maintained a commitment to keep rates low for an extended period. The BOJ has a 2% inflation target, but the latest data showed prices of items excluding fresh food rose only 0.8%.
Although the bank named trade issues as a risk, it did not change its view that the Japanese economy is “expanding moderately.” The BOJ also projected that the economy “is likely to continue its moderate expansion.”
Japan’s easy money policy stands in contrast to its global peers. The U.S. Federal Reserve is expected to hike its key rate at a meeting next week, while the European Central Bank has already signaled it will end quantitative easing by the end of the year.
Japanese Prime Minister Shinzo Abe last week said he would set a course for normalizing monetary policy before the end of his third term as the president of the ruling Liberal Democratic Party in 2021.
Kuroda reiterated his usual line on this. “The Bank of Japan will continue to operate its monetary policy to achieve the price stability target of yearly 2% inflation at the earliest possible time.”