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Kuroda Signals Quick Easing Action If Confirmed as BOJ Governor

Bank of Japan (8301) governor nominee Haruhiko Kuroda signaled a readiness for a quick expansion in the central bank’s stimulus, and reiterated confidence in the power of monetary policy to defeat deflation.

A weakening in the yen from “excessive gains” has been predicated on expectations of easing, a circumstance that won’t last forever, Kuroda, the Asian Development Bank chief, told lawmakers in his second Diet confirmation hearing today. The current scale of asset buying is “not a strong enough commitment to quickly achieve the 2 percent inflation target,” he said.

Extra stimulus may come as soon as the BOJ’s next policy board meeting on April 3-4, according to Nomura Holdings Inc. and Mizuho Securities Co., assuming Kuroda can persuade existing members of the board that immediate action is required. He has already identified at least one ally, after board member Sayuri Shirai last week proposed bringing forward open-ended asset purchases scheduled for 2014.

The BOJ board voted eight-to-one against the proposal by Shirai on March 7, in Governor Masaaki Shirakawa’s final meeting before a new leadership takes over. Shirakawa steps down with his two deputies on March 19.

Kuroda last week said that the BOJ 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.

The yen was 0.1 percent weaker at 96.07 per dollar as of 9:44 a.m. in Tokyo, extending its more than 16 percent fall since mid-November, while the Nikkei 225 Stock Average (NKY) was 0.6 percent higher.

In January, the BOJ adopted the 2 percent target without a deadline and said it would shift to the open-ended asset purchases in 2014.

Prime Minister Shinzo Abe nominated Kikuo Iwata, an economics professor who backs greater government oversight of monetary policy, and BOJ Executive Director Hiroshi Nakaso for two deputy BOJ governor posts.

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

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