Mubasher: Japan’s economy is now “strong enough” and it does not need a further surprise stimulus action from the Bank of Japan (BOJ) along the lines of what was rolled out five years ago, the central bank's governor Haruhiko Kuroda said on Monday.

“Japan's economic activity and prices are no longer in a situation where decisively implementing a large-scale policy to overcome deflation was judged as the most appropriate policy conduct, as was the case before,” he told business leaders in Nagoya.

Kuroda said that he did not see a need for applying a new easing policy that would be very different from the one currently in effect, BOJ’s governor said in subsequent news conference.

In 2013, Kuroda implemented an aggressive asset-purchase programme upon taking the lead of BOJ in a bid to drive the Asian country out of a 15-year rut marked by price declines and a cooling economy.

Solid corporate earnings and a tight labor market have reflected the clear improvement in Japan’s economy, he noted.

However, the core inflation rate stood at 1% in September, only half of the BOJ’s target.

Kuroda stressed that the central bank should continue easing monetary policy on the back of the divergence of Japan’s economy and prices, while he weigh up the policy’s positive and negative effects “in a balanced manner”.

He acknowledged that “continuing monetary easing could affect financial-system stability and the functioning of financial intermediation.”

In the same vein, Kuroda also said lenders operating in the domestic market would have to embrace new business ideas, pledging to pay attention to side effects of prolonged low rates on the banking sector.

“If inflation reaches 2%, we will seek to exit from powerful easing. If so, the yield curve would steepen and interest rates would rise, but that alone wouldn't solve banks' troubles,” he said, noting that the current interest rate hike to help banks would contract the economy, leading to further problems for lenders.

On Wednesday, the BOJ said that it would continue its huge monetary easing policy as it eyed 2% inflation, but expected prices to rise at a slower pace than previously estimated.

The policymakers said their short-term interest rate target would be held at minus 0.1%, as commercial banks would still pay interest on part of their deposit at the BOJ.