Bank of Japan Governor Haruhiko Kuroda signaled confidence among Group of 20 finance chiefs in the monetary easing he championed as Japan prepares for a national election tomorrow.
“Understanding is deepening for the BOJ’s qualitative and quantitative easing,” Kuroda said today in Moscow after a two-day meeting of G-20 finance ministers and central bankers. “While it takes time to achieve the 2 percent inflation target, monetary easing is steadily achieving” its goal of boosting the economy.
Japan is ready to help offset weakness in the global economy, Finance Minister Taro Aso said yesterday as the G-20 discussed the potential effects faced by emerging economies if the U.S. Federal Reserve scales back its stimulus. The comments from Japanese officials also signal support for Prime Minister Shinzo Abe, forecast to win an upper house election tomorrow.
“This is a rare occasion for Japan to be able to proudly talk about its economy after decades of stagnation at an international meeting,” said Naoki Iizuka, an economist at Citigroup Inc. in Tokyo. Japanese officials “probably want to help Abe’s election by emphasizing their success in reviving the economy.”
The G-20 said in a communique today that “there are signs of strengthening activity in the U.S. and Japan” while the global economy remains too weak.
The stimulus program dubbed Abenomics has buoyed the economy since Abe took office in December by weakening the yen, raising corporate profits and improving sentiment with monetary stimulus and 10.3 trillion yen ($102 billion) spending package.
The International Monetary Fund this month raised its 2013 economic forecast for Japan to 2 percent from 1.6 percent in April, while reducing global-growth projections.
Abe is set to win control of both houses of parliament at the election, the Nikkei newspaper reported July 17. A victory would give his Liberal Democratic Party-led coalition the strongest grip on power since 2007.
A focal point of the post-election would be whether Abe is able to raise a sales tax in April 2014. Aso said today he wants to increase the levy as planned, while Koichi Hamada, Abe’s adviser for reflationary policy, this week said the increase threatens to roil the economy amid a recovery.
Kuroda yesterday renewed a pledge to continue the central bank’s “powerful easing” to achieve the 2 percent inflation target while he said it’s natural for the Fed to start to slow asset purchases amid a solid recovery.
The governor has held a steady course since the central bank doubled its monthly bond purchases to more than 7 trillion yen in April after Abe urged it to take steps to beat 15 years of deflation.
The Nikkei 225 Stock Average lost 1.5 percent yesterday, the biggest drop since June 20, paring its gains to 40 percent this year, the fastest pace among major global stock indexes tracked by Bloomberg News. The yen closed at 100.65 per dollar this week, weakening 14 percent this year.