He also called on the government to map out a credible growth
strategy and take measures to boost Japan's long-term growth
potential, as improvements in the economy and an ageing population
have led to labor shortages.
"Talking at an early stage about specific plans for exiting
(quantitative easing) risks confusing markets, as we've seen in
examples overseas," Kuroda told parliament, alluding to the market
volatility caused last May by the Federal Reserve's suggestion that
it would start tapering its massive asset purchases.
"We'll need to debate plans on an exit when our 2 percent price
target is achieved in a stable manner. But it's too early to discuss
specifics now," he said.
How to withdraw the massive stimulus, including the tapering of its
government bond purchases, will depend on price and market
developments at the time, Kuroda said.
The BOJ has stood pat on policy since deploying an intense burst of
stimulus in April last year, when it pledged to double base money
via aggressive asset purchases to achieve its 2 percent inflation
target in roughly two years.
While private-sector analysts remain skeptical on whether inflation
will accelerate so quickly, Kuroda has repeatedly voiced confidence
that Japan will hit the target sometime during the next fiscal year
beginning in April 2015.
His optimistic tone has led market players to scale back
expectations of a near-term expansion of stimulus. While many still
expect the BOJ's next move to be an easing of policy, most of them
now project the timing to be delayed by several months to around
October, a Reuters poll showed.
Kuroda maintained his bullish view on the economy on Tuesday but
reminded markets that the central bank is ready to ease again if
risks threaten achievement of its price goal.
"We're still half-way through meeting our 2 percent inflation
target," he said.
GROWTH STRATEGY CRUCIAL
Japan's economic recovery has been driven largely by strength in
domestic demand, and has so far weathered the pain from an increase
in the sales tax in April. Consumer inflation has accelerated,
boding well for the BOJ's efforts to end 15 years of grinding
Core consumer inflation hit 3.2 percent in April from a year
earlier. Excluding the effect of the tax hike, inflation picked up
to 1.5 percent in April from 1.3 percent in March, suggesting that
robust domestic demand is making firms more comfortable passing on
the costs to households.
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But real wages, which is adjusted for consumer inflation, fell at
the fastest pace in over four years in April, data showed on
Tuesday, underscoring the challenges of nudging up inflation without
The BOJ has argued that companies, having seen profits rise thanks
to robust domestic demand and the boost from a weak yen on exports,
will gradually raise wages and help sustain the strength in consumer
Kuroda reiterated that improvements in the economy have boosted
domestic demand and narrowed Japan's output gap to near zero. He
then warned that such increase in domestic demand has highlighted
the need to address supply constraints that may cap long-term
An ageing population is leading to labor shortages, while prolonged
deflation has forced companies to hold back on capital expenditure.
"Japan's potential growth has fallen significantly," Kuroda said.
"It's therefore very important to map out a growth strategy to boost
Japan's potential growth. I'd like to reemphasize that point," he
Kikuo Iwata, one of Kuroda's two deputies, echoed that view, warning
that Japan could be stuck with low growth and mild inflation if the
government's growth strategy stalls.
Iwata also called for bold structural reforms, warning that without
such efforts, Japan may suffer from low economic growth even if the
BOJ's price target was achieved.
(Additional reporting by Stanley White and Kaori Kaneko; Editing by
Chris Gallagher & Kim Coghill)
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