The Bank of Japan has explained that it assesses financial conditions from three perspectives, interest rates, bank lending and asset markets, suggesting that trends in stock prices and asset prices could affect monetary-policy decisions. With long-term interest rates continuing to rise, bank-lending trends are expected to become the next focus.
At a press conference following the policy meeting, Bank of Japan Governor Ueda (植田) explained that financial conditions are assessed from three perspectives: interest rates, bank lending and asset markets. He indicated that asset-market trends could serve as a basis for judging whether financial conditions are accommodative or tight.
He said that long-term interest rates were already considered to have risen sufficiently, and stated that bank-lending trends would be the next focus. The discussion covered both the textbook path under which lending could lag an economic downturn and the possibility of other transmission channels.
It was pointed out that it is important to determine not only the level of outstanding loans but also the factors behind their growth, and the Bank of Japan said it would continue its analysis with a view to both lending trends and asset-market conditions.
The outlook presented was that the interpretation of financial conditions as accommodative would be maintained as long as stock prices did not break down, while a sharp decline in stock prices could lead to a debate that the effects of tighter conditions had begun to emerge.