Reuters logo
Bank of Japan's Kuroda signals ready to keep stimulus more than two years
April 10, 2013 / 12:10 PM / 5 years ago

Bank of Japan's Kuroda signals ready to keep stimulus more than two years

TOKYO (Reuters) - Bank of Japan Governor Haruhiko Kuroda said on Wednesday that the bank was resolved to keep printing money for as long as needed to achieve 2 percent inflation, signalling his readiness to offer further stimulus or maintain an ultra-easy policy beyond two years if meeting the target by then proves difficult.

Bank of Japan Governor Haruhiko Kuroda speaks during a group interview at the BOJ headquarters in Tokyo April 10, 2013. REUTERS/Toru Hanai

Barely two weeks into the job, Kuroda stunned global markets in his maiden BOJ policy review on April 4, announcing monetary easing measures of an unprecedented scale.

Speaking to journalists days later, he suggested there would be no additional stimulus given in coming months.

The central bank, he told a group interview, must take time scrutinising the effect of last week’s bold action.

“Our belief is that we took all necessary steps to achieve the 2 percent inflation target basically in two years. We’ll examine the effect each month but that doesn’t mean we will adjust policy every month,” Kuroda said.

The BOJ last week unleashed the world’s most intense burst of monetary stimulus, pledging to inject about $1.4 trillion (914.6 billion pounds) into the economy in less than two years, marking a radical shift from the previous approach of incremental action.

The massive scale of the stimulus pushed the yen near a four-year low against the dollar and Japan’s Nikkei share average to a nearly five-year closing high.

But the BOJ’s plan to buy 7.5 trillion yen ($76 billion) of bonds each month -- about 1.4 percent of Japan’s gross domestic product -- have jolted bond prices with the 10-year yield rebounding to 0.555 percent on Wednesday from a record low of 0.315 percent last week.

Kuroda said the bond market reaction was understandable given the scale of the BOJ’s action, but that he will monitor price moves carefully.

He said he was confident the latest measures were enough to achieve the BOJ’s 2 percent inflation target in roughly two years, but signalled readiness to keep pumping money aggressively for longer if the target is not achieved by then.

“The key is to achieve the 2 percent inflation target. We have in mind a timeframe of roughly two years, but we’ll take necessary steps until the target is met,” he said.

A former top currency diplomat and a vocal advocate of aggressive monetary action, Kuroda was chosen by Prime Minister Shinzo Abe to head the BOJ with a mandate to steer the bank along a bolder course to beat deflation than the one taken under his cautious predecessor Masaaki Shirakawa.

The measures unveiled by Kuroda last week won praise from Abe’s government as fulfilling the premier’s relentless pursuit of what he described as a “regime” change in economic policy.


Kuroda said the BOJ’s stance that its monetary stimulus aims to beat deflation, not deliberately weaken the yen, would be explained to Group of 20 finance leaders meeting in Washington next week.

Japan’s move won cautious endorsements from the head of the International Monetary Fund and some Federal Reserve policymakers, who said it could help economies around the world. But there are concerns that the unprecedented easing may provoke a currency war as other Asian exporters, such as South Korea, try to stay competitive with weaker currencies.

“Our policies are taken for domestic purposes and currencies are absolutely not our target. If Japan’s economy recovers steadily and price stability is achieved as a result, that benefits not just Japan but the global economy including our neighbours,” Kuroda said.

“It’s unthinkable that we will change monetary policy just because currencies move in a certain way,” he said.


Under pressure from Abe, who came to power in an election in December, to take bolder action to beat deflation, the BOJ in January doubled its inflation target to 2 percent.

Many analysts consider the target to be too ambitious for a country that has not seen prices rise for nearly two decades.

Kuroda said he saw little need now to worry about the BOJ’s latest stimulus sowing the seeds of a bubble, and that it was too early to debate an exit from its ultra-easy policy.

Economic and price developments, the governor said, could nudge the BOJ either toward loosening policy or withdrawing stimulus in the future. “Adjustment in policy could be either way,” he said.

He added that in the event of withdrawing stimulus, the BOJ may not necessarily have to sell government bonds to the market and instead may look at some steps floated by the U.S. Federal Reserve, such as raising interest rates for excess reserves parked with the central bank.

($1 = 99.0050 Japanese yen)

Editing by Simon Cameron-Moore

0 : 0
  • narrow-browser-and-phone
  • medium-browser-and-portrait-tablet
  • landscape-tablet
  • medium-wide-browser
  • wide-browser-and-larger
  • medium-browser-and-landscape-tablet
  • medium-wide-browser-and-larger
  • above-phone
  • portrait-tablet-and-above
  • above-portrait-tablet
  • landscape-tablet-and-above
  • landscape-tablet-and-medium-wide-browser
  • portrait-tablet-and-below
  • landscape-tablet-and-below