The head of the Bank of Japan Haruhiko Kuroda said on Friday that at the moment the regulator "has no reason" to refuse the large-scale monetary stimulus measures or to raise target levels of government bonds yield, since inflation is still far from the 2% - the target level of the central bank.
Kuroda also rejected fears of financial markets that the Bank of Japan will eventually lose the ability to control long-term interest rates within the framework of targeting the yield curve.
"I do not think that now we need to raise the target of interest rate levels," Kuroda said at the Reuters Newsmaker conference.
However, he added: "If inflation in Japan sharply accelerates, at some point, the Bank of Japan may discuss an adjustment of the target interest rate level."
Although the market conditions and prices in Japan are recovering, the risks are still there, as broader economic activity is not yet high enough to push up inflation, the regulator said.
"When deciding on monetary policy, we should look at the basic trend of inflation. We will not change monetary policy only because oil prices push inflation up," Kuroda said.
He added that the Bank of Japan will not raise the target level of bond yields solely because of the growth in long-term interest rates abroad - a scenario that, in the opinion of some traders, is inevitable.
Following the meeting on March 16, the Bank of Japan kept the key rate at -0.1% and again promised to keep the yield of 10-year state bonds around zero.
For a long time, the stagnant Japanese economy has shown signs of improvement in recent months, as exports and industrial production gained an edge amid global demand recovery.
Basic consumer prices in January rose for the first time in more than a year, and analysts are waiting for the continuation of a slow but steady recovery.
This led to a sharp change in market expectations. Most analysts interviewed by Reuters now believe that the next step of the Bank of Japan will be the beginning of the winding down of super-soft policy, and the first measure is likely to be the increase in the target level of government bonds' yield.