BOJ Kuroda: Central bank steps on climate must be within mandate

Central banks must ensure any action they take in helping society combat climate change are within their mandates and carefully tailored to avoid impairing market neutrality, Bank of Japan (BOJ) Governor Haruhiko Kuroda said on Tuesday.

Central banks must also be ready to explain to the public "what they can do and will do" to combat climate change, he said at an event organised by the Swedish Riksbank in Stockholm, which was streamed live on the Internet.

"Central banks, which are independent from governments cannot unconditionally respond to climate change," and must "autonomously decide their actions within their mandate" from a long-term perspective, Kuroda said.

While responses to climate change "inevitably involve distinction between green and brown," central bankers must try to affect the overall economy rather than specific industries as they are not elected officials, he said, citing the terms coined to describe activities based on sustainable energy and those relying on fossil fuels.

The BOJ launched in 2021 a scheme under which it offers zero-interest loans that can be rolled over until 2030 to banks that boost green and sustainable loans.

Japan's central bank law prescribes that the BOJ should cooperate with the government in guiding monetary policy, an approach that also applies to dealing with climate change, Kuroda said.

While the BOJ does not have a specific mandate on climate change, its measures taken in relation with climate change are in line with those of the government and "generally accepted by the public," he said.