FILE PHOTO: Bank of Japan Governor Haruhiko Kuroda speaks at a news conference in Tokyo, Japan, December 19, 2019. REUTERS/Kim Kyung-Hoon/File Photo
May 24, 2021
By Leika Kihara
TOKYO (Reuters) -Bank of Japan Governor Haruhiko Kuroda on Monday said the unevenness of the world’s recovery from a coronavirus-triggered recession could lead to an increase in savings, economic inequality and indebtedness.
“The trio of increased savings, inequality and debt is considered to be intertwined in practice and may theoretically reduce the natural interest rate,” Kuroda said in a speech to a BOJ-hosted academic conference.
As the global economy emerges from the pandemic’s initial hit, the role of central banks will shift from providing liquidity support to helping companies stay solvent, he said.
“The nature of the policy responses will … shift from temporary first aid measures to medium- to long-term structural policies,” Kuroda said. “In this sense, we are seeing a widening in the scope of issues that central banks should take into account.”
Some central banks are seeking to withdraw crisis-mode policies as global growth rebounds from last year’s slump and inflation ticks up.
Others, including the BOJ, have pledged to keep monetary policy ultra-loose as their countries struggle with resurgent infection rates.
Kuroda said the uneven nature of the global recovery could aggravate inequality which, together with “increasing worldwide concern” over climate change, provide fresh challenges to policymakers.
The health crisis has also led to widespread and rapid digitalisation, which could increase productivity but may heighten inequality if the benefits are felt by only a small fraction of society, he added.
“We are beginning to see the light at the end of this pandemic tunnel, but the light does not clearly reveal the shape of the society and economy we are approaching,” Kuroda said.
(Reporting by Leika Kihara; Editing by Hugh Lawson)