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BOJ May Be Thinking But Not Doing Exit in 2019, Kuroda Says

Updated on
  • Kuroda says it’s too early to debate tools and timing of exit
  • In final hearing, governor clarifies last week’s remarks

Haruhiko Kuroda, governor of the Bank of Japan (BOJ)

Photographer: Stefan Wermuth/Bloomberg

Governor Haruhiko Kuroda made clear on Tuesday that while the Bank of Japan may find itself thinking about exiting monetary stimulus in the 2019 fiscal year, this doesn’t mean it will actually be doing it then.

His comments, during a second confirmation hearing in Japan’s parliament, follow remarks on March 2 that sent the yen surging and pushed yields on Japanese sovereign debt higher across the curve.

“Right now it’s too early to debate what tools we should use, and what kind of pace we should take,” he said on Tuesday. Kuroda emphasized that he hadn’t meant to imply that the BOJ would immediately make a change in the fiscal year starting in April 2019, when it forecasts meeting its 2 percent inflation target.

"I said that we would be discussing how to move forward with exit. I never said we would be exiting immediately in fiscal 2019," he told lawmakers.

The yen strengthened during Kuroda’s testimony in parliament, hitting a high of 106.07 against the dollar before weakening.

Since joining the BOJ in 2013, Kuroda has presided over a massive increase in its stimulus by cutting interest rates below zero and buying hundreds of trillions of yen worth of assets. If all goes as he forecasts and inflation does rise to 2 percent, he will also preside over the run down of that policy during his next five-year term, which starts next month.

With global peers like the Federal Reserve already normalizing monetary policy, there has been intense scrutiny on Kuroda’s every word for the slightest hints on when Japan will follow suit. There have been several occasions in recent months when the governor and the BOJ have had to come out and clarify comments after sharp reactions from markets.

As recently as January, a spokesman for the central bank was prompted to send an email noting that Kuroda wasn’t revising the inflation outlook when he had said in Davos that consumer prices were finally moving close to the 2 percent target. The yen had advanced after Kuroda’s remark.

A speech in November in Switzerland in which he mentioned the "reversal rate” theory also stoked speculation about an early policy exit. That led to numerous clarifications from Kuroda, in parliament and a press briefing after a December policy meeting, in which he said that bringing up this academic analysis didn’t mean there was a need to review the BOJ’s monetary settings.

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