(Reuters) – The Bank of Japan (BOJ) maintained ultra-easy monetary policy on Friday despite stronger-than-expected inflation, signalling it will remain a dovish outlier among global central banks and focus on supporting a fragile economic recovery.

Following are excerpts from BOJ Governor Kazuo Ueda’s comments at his post-meeting news conference, which was conducted in Japanese, as translated by Reuters:

TREND INFLATION

“We expect trend inflation to heighten as economic activity heightens and the labour market tightens. But there’s very high uncertainty on next year’s wage negotiations and the sustainability of wage growth.”

“We expect Japan’s consumer inflation to slow as cost-push factors dissipate. But we also see notable changes in corporate price-setting behaviour. I would add that there’s very high uncertainty on the economic and price outlook.”

“We expect inflation to moderate, but it’s true the pace of decline is somewhat slow. But we’re still in the early stages of the moderation. There’s uncertainty on whether the future slowdown will be a gradual one, or a quite sharp one.”

ON WHETHER YCC COULD BE TWEAKED IN JULY

“We decide policy by carefully weighing the benefits of costs of each measure. We will communicate our view on the economy and prices, as well as side-effects such as our policy’s impact on market functions.”

ON RECENT YEN DECLINES

“In theory, a weak yen could be positive for some sectors, but negative for other sectors. The impact depends on when the currency is moving. It’s important for currencies to move stably reflecting fundamentals.”

ON HOW BOJ CAN JUDGE WHETHER JAPAN’S TREND INFLATION IS CLOSE TO HITTING 2%

“What’s important is not just our median forecast but how certain that forecast is … We won’t act just by looking at the median forecast. We’d like to look comprehensively at various data including distribution (of the various inflation forecasts).”

ON WHETHER BOJ COULD WIDEN ITS ALLOWANCE BAND AROUND ITS YIELD TARGET IF LONG-TERM RATES RISE AGAIN

“We’ve seen the side-effects of YCC subside recently. But there’s a chance long-term rates could rise depending on market expectations of domestic inflation, and overseas developments … As for what we will do will depend on how we see the balance between the merits of maintaining YCC, and the demerits.”

ON BALANCE OF BRIGHT SIGNS IN JAPAN’S ECONOMY, AND HEIGHTENING OVERSEAS RISKS

“Our baseline scenario is that while overseas economies are weakening somewhat due to the effect of past interest rate hikes, we expect growth to pick up if inflation moderates smoothly. If so, Japan’s economy will likely continue a moderate recovery. But it’s true there is a chance global growth could undershoot expectations, which would have a negative impact on Japan’s economy.”

ON MONETARY POLICY OUTLOOK

“We guide policy projecting the economic and price outlook such as that for half-a-year ahead. Even if the economy isn’t changing much now, if the outlook is changing dramatically, we’ll have to shift policy. At present, inflation has exceeded 2% for 13 straight months but could fall below that level ahead. That’s why we are not normalising monetary policy. But if that view changes sharply, we will have to change policy.”

ON RISKS TO INFLATION

“We have to consider what tools we have at our disposal when inflation overshoots, and when it undershoots. When we compare these, it’s probably more difficult to deal with an undershoot of inflation.”

(Reporting by Leika Kihara; Editing by Subhranshu Sahu)

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