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 Kuroda seized the opportunity to speak directly to financial markets
on Tuesday, when the Bank of Japan (BOJ) introduced live news
conferences, reinforcing his core message that the recovery in the
world's third-biggest economy was steadily banishing 15 years of
deflation.
Nearly a year after unleashing an unprecedented burst of asset
purchases — printing money to buy government bonds and forcing
long-term bond yields lower — Kuroda has been consistently bullish
about achieving his 2 percent annual inflation target.
But with entrenched expectations that the BOJ would take further
easing measures in the next few months, he spoke more forcefully
than before — and was heard in real time.
Previously, his media briefings after BOJ decisions were not
broadcast live. Instead, reporters were prevented from publishing
his remarks until the briefing ended, when summary headlines would
spill out on traders' screens in a single barrage.
Tuesday's hour-long, live presentation featured some unusually
strong language, and it hit its mark.
"I guess Governor Kuroda always appears to be brimming with
self-confidence, but for people seeing him for the first time, this
must have been vivid," said Izuru Kato, chief economist at Totan
Research. "He was so confident, he may have seemed hawkish."
Most of about a dozen economists and market participants interviewed
after Kuroda's performance said their forecasts had not changed but
that the bookish central banker's bullishness may have pushed back
market expectations of further stimulus.
Most also said the yen's pop was likely the result of short
positions — investors betting that the Japanese currency would fall — getting squeezed, rather than a new uptrend for the yen, which has
dropped sharply during Kuroda's year of easy money.
The U.S. dollar fell more than 1 percent against the yen on Tuesday
after Kuroda's remarks, accelerating its decline in overseas trade
to 101.55 yen, its lowest level since March 19. The Tokyo stock
market, already closed for the day when Kuroda spoke, tumbled 2.1
percent on Wednesday.
'HEADLONG EXPECTATIONS'
Kuroda chose his live debut to tell investors, in unusually strong
language, that "Japan is making steady progress towards 2 percent
inflation. I don't think there is a need to take additional measures
now."
He added: "As always, I remain convinced about the prospect for
achieving our price target."
He stressed that the economy would recover briskly from a national
sales tax implemented last week, that Japan's labor markets were
tight and that growth had almost caught up with its potential. He
even went so far as to say that the BOJ could adjust policy in
either direction.
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And yet, while this all surprised some investors, prominent BOJ
watchers saw a change only in delivery.
"His stance hasn't changed but he conveyed his intention to change
market expectations of additional easing — to correct the headlong
expectations for easing," said Hideo Kumano, chief economist at Dai-ichi
Life Research Institute.
To be sure, not everyone was impressed.
"It gave the market a message that he had no choice but to read a
draft that his staffers prepared for him, which is an image of the
old BOJ culture," said Kyoya Okazawa, head of global equities at BNP
Paribas, who called the presentation "uninspiring".
As it has done every meeting since last April's easing, the BOJ kept
its commitment to increase base money, its key policy gauge, at an
annual pace of 60-70 trillion yen ($580-$680 billion).
A Reuters poll last month showed analysts expect the BOJ to ease
again by July on doubts that core consumer inflation, which rose an
annual 1.3 percent in February, will accelerate further, let alone
reach the BOJ's 2 percent target. Recent data has been soft, and the
economy has slowed sharply in recent quarters.
The message now seems to be sinking in that it will take something
serious for Kuroda to change policy.
The BOJ's new, more open style is the result of years of
consideration, and officials bill it as the adoption of what is now
considered best practice in central banking communication, aligning
the Japanese bank's approach with peers such as the U.S. Federal
Reserve and the European Central Bank. The market impact of Kuroda's comments, however, shows he now faces
the same challenge as other central bank heads, including Janet
Yellen at the U.S. Federal Reserve — not to be misunderstood by the
market.
(Additional reporting by Yoshiko Mori, Lisa Twaronite, Ayai Tomisawa
and Shinichi Saoshiro; writing by William Mallard; editing by Nachum
Kaplan and Mark Bendeich)
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