Haruhiko Kuroda said the unprecedented stimulus announced by the Bank of Japan (8301) at his first meeting as governor last week is enough to achieve a 2 percent inflation goal.
The central bank has taken all “necessary” and “possible” measures, Kuroda told reporters in Tokyo yesterday. While officials will change policy as needed, he doesn’t expect adjustments each month, he said. The BOJ chief reiterated a pledge to do what’s needed to meet the target in two years.
Kuroda may be trying to head off criticism at a Group of 20 meeting in Washington next week by signaling limits to easing that escalated yen declines against the dollar to about 18 percent since mid-November. While Australian Treasurer Wayne Swan yesterday supported Japan’s policies, nations from China to South Korea are concerned by currency weakness and the risk of capital spillovers.
Kuroda’s “got work to do to avoid overt criticism,” said Kit Juckes, a global strategist at Societe Generale SA in London. “He’ll want to smooth the way with the G-20.”
The yen rose 0.2 percent to 99.59 per dollar at 11:30 a.m. in Tokyo, after yesterday touching 99.88, the weakest level since April 2009. Kuroda pledged last week to double the monetary base in two years after becoming BOJ governor in March.
He said yesterday that the BOJ’s campaign to fuel prices and growth isn’t targeting the yen and monetary policy won’t be altered because of currency moves.
Finance ministers and central bank governors from the G-20, which groups the largest developed and emerging nations, will gather April 18-19. The yen dropped about 6 percent through yesterday from mid-February, when the finance chiefs met in Moscow. At that gathering, they signaled that Japan had scope to keep stimulating its economy so long as it refrained from advocating a weaker currency.
“We will monitor closely what happens with the currency’s rate, and how that affects the economy,” Kuroda said. “I don’t think monetary policy would change because of what was happening with the currency,” he said, adding that the government is responsible for the yen.
The Nikkei 225 Stock Average surged more than 50 percent since mid-November, as Shinzo Abe pledged unlimited monetary easing in the campaign that saw him swept to victory as prime minister. “The biggest commitment is that we will take all necessary measures,” Kuroda said yesterday.
The Nikkei was up 0.8 percent at 11:30 a.m. in Tokyo, headed toward the highest level since August 2008.
Abe and Kuroda are aiming for sustained gains in prices and wages after nearly 15 years of deflation and three recessions in five years. They are up against an aging population and the world’s biggest public debt load, about double the size of the economy.
Gross domestic product rose an annualized 0.2 percent in the fourth quarter of last year. Prices excluding fresh food, officials’ key measure, haven’t gained 2 percent in any year since 1997, when a sales tax was increased.
Kuroda said markets may be seeking a “new equilibrium point” for long-term yields, and the market’s reaction to the central bank’s easing was in line with his expectations.
The yield on the 10-year bond touched a record low of 0.315 percent on April 5, the day after the BOJ’s policy announcement, and then surged to almost double that level in the same session. Also that day, shifts in bond futures triggered circuit breakers on the Tokyo Stock Exchange.
The BOJ plans to hold a meeting with bond market participants after Abe said this week that the market needs close attention. Kuroda said that the “quantity and quality” of monetary easing is causing market reactions, which the BOJ will “carefully monitor.”
The central bank’s monetary onslaught is prompting forecasts for further yen declines, after Abe’s economic adviser Koichi Hamada said that while a rate of 100 per dollar would be no problem, a level of 110 would boost import costs. Tohru Sasaki, Tokyo-based head of Japan rates and currency research at JPMorgan Chase & Co., said yesterday that the currency may fall to 110 per dollar.
“Expansionary monetary policy can bring about a depreciation of the currency,” Australia’s Swan said in an interview at the Bloomberg Australia Economic Summit in Sydney when asked about concern Japan is driving down the yen. “But that doesn’t mean it is manipulation.”
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