Kuroda Pledges Bolder Action as Bank of Japan Governor: Economy Haruhiko Kuroda said that the Bank of Japan (8301) will do whatever is needed to end 15 years of deflation should he be confirmed as governor and indicated that open-ended asset purchases could start sooner than next year.
“I would like to make my stance clear that we will do whatever we can do,” Kuroda, president of the Asian Development Bank, said at a confirmation hearing in the parliament in Tokyo today. The central bank hasn’t bought enough assets and should consider buying large amounts of longer-term bonds, he said.
Stocks, Yen
The Nikkei 225 Stock Average (NKY) pared gains and the yen strengthened after Kuroda said that the BOJ should refrain from directly underwriting government debt -- highlighting the potential for even expanded action by the central bank to disappoint some investors.
The yen rose 0.3 percent to 93.33 per dollar as of 12:29 p.m. in Tokyo. The stock benchmark was up 0.6 percent after earlier rising as much as 1.4 percent. The 10-year government bond yield fell to a decade low.
While meeting a 2 percent inflation target will not be easy, Kuroda is confident that the BOJ can do it, he told the lawmakers. He added that a two-year time-frame is the global standard for such goals.
Nomura Holdings Inc. and Mizuho Securities Co. say more easing could come as soon as the first policy meeting under the new BOJ leadership, scheduled for April 3-4.
Ending deflation will be good for the global economy, Kuroda said, adding that Japan’s easing is not aimed at weakening the yen -- a restatement of official comments aimed at easing global concern over the currency’s decline of about 12 percent against the dollar in three months.
Foreign Bonds
Kuroda said that purchases of foreign bonds by the central bank would be difficult, echoing comments by Abe last month after Group of 20 nations pledged to refrain from targeting exchange rates for competitive purposes
Kuroda said previously that falling prices exacerbate real debt burdens, and give an incentive to companies and households to postpone spending. Consumer prices excluding fresh food fell 0.2 percent in January. The price gauge hasn’t advanced 2 percent -- the central bank’s new target -- for any year since 1997, when a national sales tax was increased.
“Further easing policies are needed,” he said today. “However, the policy board will decide on the specifics of doing this based on market conditions and economic trends.”
He said that, while a self-imposed rule limiting bond purchases is not something adopted by other central banks, the BOJ shouldn’t “buy bonds directly or monetize debt.”
The BOJ has pledged to keep the value of its bond holdings below the amount of cash in circulation, excluding an asset- purchase program which it counts separately.
Iwata, Nakaso
Abe has nominated Kikuo Iwata, an economics professor who backs greater government oversight of monetary policy, and BOJ Executive Director Hiroshi Nakaso for two deputy governor posts.
While Shirakawa established a 76 trillion yen ($814 billion) asset-purchase fund and an unlimited bank-loan financing program, he failed to encourage inflation, instead warning repeatedly about the dangers of excess stimulus.
Elsewhere in the Asia Pacific region, inflation in South Korea and Australia slowed in February, while Australian home- building approvals unexpectedly declined for a second month in January, reports showed today. Chinese property stocks tumbled after a March 1 announcement of measures to cool the property market.
U.K. house prices rose in February for the first time in nine months, Hometrack Ltd. said. Euro-area producer prices probably increased, according to a Bloomberg survey. Jobless claims in Spain probably climbed last month from January, a separate Bloomberg survey showed.
To contact the reporter on this story: Toru Fujioka in Tokyo at tfujioka1@bloomberg.net
To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net |
