TOKYO (Thomson Financial) - A member of the Bank of Japan's policy board, Kiyohiko Nishimura, has said the central bank needs to adjust interest rates gradually and prudently, in line with the pace of the improvement in the economy.
"The policy rate should be adjusted gradually to the trend of general economic conditions, and the timing of policy change should depend on the pace of economic improvement," Nishimura told a meeting of the Brookings Institution.
Nishimura is considered one of the more dovish of the nine members of the policy board.
"To stand pat for a long period of time is not a prudent strategy, since the acceleration of economic activity may in the future come to require a large adjustment in the policy rate, causing unnecessary swings in economic activity and prices," he said.
But he said that policy adjustment "cannot be pre-scheduled."
He said that when the global economy overcame increased diversity and deeper uncertainty, policy makers would be able to take a more orthodox, text-book approach in managing monetary policy.
But he said that because "a great deal of uncertainty remains about the time needed to get there, much prudence is required."
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Yasuhiko.Seki@thomson.com
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