ADB’s Kuroda Urges Unlimited BOJ Easing Toward 2% Inflation

The Bank of Japan should conduct unlimited easing until it achieves 2 percent inflation, Asian Development Bank President Haruhiko Kuroda said.

“It’s very important to commit to a clear inflation target,” Kuroda, a potential contender to succeed BOJ Governor Masaaki Shirakawa when the latter’s term ends in April, said today at a seminar in Tokyo. “The BOJ should make a commitment like the Federal Reserve or European Central Bank and not limit itself to easing in batches of tens of trillions of yen.”

The BOJ is set to adopt the 2 percent inflation target advocated by Prime Minister Shinzo Abe without setting a deadline for achieving it, according to people familiar with officials’ discussions. The yen has fallen around 10 percent since mid-November as Abe has called for more aggressive monetary measures to end deflation.

Kazumasa Iwata, a former BOJ deputy governor who is also a potential contender to replace Shirakawa, said at the same seminar today that central bank’s target “should have a degree of flexibility.”

The yen was at 88.92 per dollar as of 5:29 p.m. in Tokyo after touching the weakest level since June 2010.

Iwata, president of the Japan Center for Economic Research, said an equilibrium level would be around 95 yen, while Kuroda, a former vice finance minister, said the yen was “slightly overvalued.”

Iwata and Kuroda are contenders to replace Shirakawa, according to Koichi Hamada, an economic adviser to Abe, and Mari Iwashita, Tokyo-based bond strategist at SMBC Nikko Securities Inc. Chief Cabinet Secretary Yoshihide Suga said Jan. 9 that the next BOJ chief should see the need for bold easing.

The BOJ expanded its asset-purchase program for the third time in four months in December, increasing it to 76 trillion yen ($854 billion) from 66 trillion yen.

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