TOKYO, Jan 28 (Reuters) - The Bank of Japan could consider targeting a shorter maturity than the current 10-year bond yield when the time comes to exit its ultra-easy policy, the central bank's governor, Haruhiko Kuroda, said on Friday.
At this stage, however, it was premature to raise the BOJ's interest rate targets or take steps to steepen the yield curve, Kuroda told parliament.
"If the time comes to exit ultra-loose policy and debate an exit strategy, such steps could be discussed," Kuroda said, when asked about the chance of targeting shorter-duration bond yields under its yield curve control (YCC) policy.
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"When 2% inflation is achieved, there will be various discussions on an exit which will be communicated to markets. At this stage, however, it's appropriate to maintain the current YCC policy," he said.
As part of efforts to fire up inflation to its 2% target, the BOJ guides short-term rates at -0.1% and the 10-year bond yield around 0% under YCC.
While the policy has kept borrowing costs low for firms, it has drawn criticism from commercial banks for flattening the yield curve and crushing the margins they earn through lending.
The International Monetary Fund on Friday proposed the BOJ consider further steps to mitigate the hit to bank profits from prolonged easing, such as by targeting a shorter maturity than the current 10-year yield. read more
"The current policy is appropriate for maintaining the yield curve stably at low levels," Kuroda said, when asked by an opposition lawmaker about the IMF's proposal.
Kuroda also said the Federal Reserve's expected interest rate hikes were "very appropriate" to rein in inflation while ensuring the U.S. economy continues to achieve strong growth.
"There were cases where U.S. rate hikes triggered a weak yen. But that's not always the case," Kuroda said.
"I don't think the Fed's expected policy path will have a negative impact on Japan's economy or markets," he added.
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Editing by Simon Cameron-Moore and Jacqueline Wong
Our Standards: The Thomson Reuters Trust Principles.
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