Bank of Japan Governor Haruhiko Kuroda said on Tuesday the central bank has entered a phase where it must consider not just the merits but the side-effects of its massive stimulus programme in a "balanced manner".

He also said the BOJ's new commitment to keep interest rates very low for an "extended period" did not mean near-zero rates will be maintained permanently, reminding markets that the central bank could raise rates if the inflation rate picks up.

"We hope to achieve 2% inflation at the earliest date possible by maintaining our powerful monetary easing, so that we can begin normalising monetary policy," Kuroda said.

Kuroda said that while he would not rule out changing the commitment, it was an appropriate one for now as inflation remains distant from the BOJ's target.

While his remarks do not suggest an immediate policy change, they leave the door open to a shift and underscore a growing sense in the BOJ that it cannot sustain its massive, radical stimulus without focusing on the policy's side-effects.

Sources of concern are the rising cost and diminishing returns of the stimulus, which has eroded commercial banks' profits via ultra-low rates and failed to fire up inflation to its elusive 2% target.

In minutes of the BOJ's July meeting, released earlier on Tuesday, a few policymakers warned that the central bank must consider more seriously the potential dangers of ultra-easy policy, such as damage to the banking system.

Kuroda said while wages and prices are turning up, reflecting a strengthening economic recovery, achievement of his 2% target was taking more time than expected.

Prime Minister Shinzo Abe said last week his key economic policy goal has been fulfilled, with job losses at record lows, signalling he was no longer persisting on achieving 2% inflation.

 Kuroda dismissed the idea that the government was becoming more relaxed about meeting the price goal, saying Abe's comments reflected the fact the government had a broader mandate than the BOJ does. "I don't think there's a big gap in view between the government and the BOJ" on the need to meet the price target, Kuroda said, stressing he saw no need to change the target or make it a longer-run goal. is an independent macroeconomic consultancy with thousands of subscribers all over the world. We provide fundamental research to help our clients make better investing decisions. Our subscribers should expect to get access to:

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