BoJ’s Kuroda open to greening monetary policy

April 19, 2021|Written by Graham Caswell|Bank of Japan

Bank of Japan (BoJ) Governor Haruhiko Kuroda told the Japanese Parliament that the bank is open to the use of monetary policy tools to address climate change.

Speaking on Friday, Kuroda was asked by a representative how the BoJ can use monetary policy to help achieve climate goals. While avoiding a direct answer, Kuroda expressed willingness to consider the possibility.

“We hope to deepen debate in international meetings. I’m not saying we won’t think about possibilities at all,” he said. Kuroda also warned that decisions on climate change and monetary policy must take into account the BoJ’s mandate of price and financial stability.

Climate change is now one of the key themes guiding the BoJ’s monetary policy. The bank conducted a review of its policy tools in March with a view to making them more sustainable. However most of the BoJ’s climate response has so far focused on climate risk and Kuroda has been wary of adding climate-related criteria to corporate bond purchases in the bank’s quantitative easing programme.

Kuroda’s remarks may signal a growing acceptance of the need for climate action by the BoJ. They follow similar comments on monetary policy he made while introducing an international research workshop on climate-related financial risk held by the BoJ last month.

“[Climate change] issues relating to monetary policy are important topics, and the Bank of Japan will continue to explore them,” he told an audience of central bankers and academics. “Whether a central bank should be more proactive in introducing measures to support sustainable finance deserves further discussion.”

The bank recently announced that it will include climate-related risks among the key themes in its bank examinations for the first time. However, while the BoJ monitors financial institutions through voluntary examinations, regulatory authority belongs to the Financial Services Agency which does not yet stress test banks for climate risks.

This page was last updated April 27, 2021

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