Bank of Japan Governor Kazuo Ueda said considerations over the central bank's finances would not prevent it from phasing out its massive monetary stimulus when the appropriate time comes.
While Ueda said there was "still a distance to go" before the BOJ exits ultra-loose monetary policy, his remarks come at a time when markets are rife with speculation he will dismantle his predecessor Haruhiko Kuroda's radical stimulus programme.
But it is also likely to earn higher interest income as its current government bond holdings are replaced by higher-yielding bonds, he said, adding it was hard to accurately predict to what extent a future exit could affect the BOJ's finances. "A central bank's ability to conduct monetary policy is not impaired by a temporary decrease in its profits and capital, provided that it conducts appropriate monetary policy," he said.
Some academics have warned the BOJ's huge balance sheet will make an exit from ultra-loose policy difficult by exposing it to massive losses that could put its credibility on the line.
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