BOJ Must Achieve 2% Price Target, New Board Member Funo Says

Bank of Japan new board member Yukitoshi Funo
Bank of Japan new board member Yukitoshi Funo. Source: Bank of Japan via Bloomberg

Bank of Japan’s newest board member Yukitoshi Funo said the central bank must achieve its price target, indicating his support for Governor Haruhiko Kuroda.

“The 2 percent inflation target must be met” Funo, a former executive of Toyota Motor Corp., said in his inaugural press conference Wednesday in Tokyo. “Price stability and higher productivity is needed for Japan’s sustainable growth.”

Funo succeeded a policy board member who opposed Kuroda’s decision to increase unprecedented monetary easing in October in a split 5-4 vote, the BOJ’s closest since 2008. With inflation far from the BOJ’s 2 percent target, most economists forecast the central bank will eventually increase stimulus further, a move that would probably require Funo’s support, according to Hideo Kumano, a former BOJ official.

“It’s very important for Kuroda to have Funo on his side,” said Kumano, who is now an economist at Dai-Ichi Life Research Institute in Tokyo. “It will be interesting to see Funo’s judgment if the yen weakens too much.”

The divide on the board is “healthy” as members have different opinions, Funo said.

Funo, who was among those decrying yen strength years before Prime Minister Shinzo Abe came to office in 2012, is likely to support extra easing unless the yen falls to the point where resulting higher import costs overwhelm any benefits from increased competitiveness, Kumano said.

Foreign-exchange rates should be determined by the market and the economy should have strength to withstand currency moves, Funo said.

Yen’s Slide

The yen was at 122.87 per dollar at 7:34 p.m. in Tokyo on Wednesday, having tumbled 31 percent since Abe came to power in December 2012.

Yoshihisa Morimoto, a former executive at Tokyo Electric Power Co., ended his five-year term on the BOJ’s nine member board on Tuesday. Morimoto sided with Koji Ishida, Takehiro Sato and Takahide Kiuchi in voting against Kuroda’s decision on Oct. 31 to increase the pace of asset purchases.

The BOJ’s main price gauge showed inflation was at 0.1 percent in May, more than two years after Kuroda introduced the record asset-purchase plan. The central bank kept policy unchanged on June 19, with Kuroda saying the underlying trend in prices is expected to keep improving.

Funo is proficient in English, with a master of business administration from Columbia University. He is a former chief of Toyota’s North American operations.

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