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BOJ Kuroda calls for bolder reforms to meet G20 commitment

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[June 23, 2014]  By Leika Kihara

TOKYO (Reuters) - The governor of the Bank of Japan called for bolder efforts to raise the economy's potential as part of a G20 drive to boost long-term global growth, keeping up pressure on the prime minister to lay out a credible growth strategy.

"Coming up with growth strategies is a key challenge for Group of 20 members, so Japan must make further efforts on this," Haruhiko Kuroda told a meeting of business executives on Monday.

Prime Minister Shinzo Abe's government has pledged to boost Japan's potential growth to 2 percent from current levels of around 0.5 percent.

Kuroda described that goal as "ambitious but not impossible", if efforts are made to deregulate the economy and encourage more women and foreigners to enter a shrinking working population.

The comments came a day before Abe is set to deliver the latest installment of his long-term growth strategies, which range from corporate tax cuts and public pension reforms.

The so-called "third arrow" would follow the first two arrows of aggressive monetary and fiscal stimulus that helped revive Japan's economy, although analysts doubt how much of Abe's reforms will be fulfilled enough to boost long-term growth.


Kuroda has been escalating calls for Abe to embark on bold reforms as a rebound in domestic demand highlights supply constraints that could curb long-term growth, such as a shortage of young workers in a rapidly ageing population.

The governor, however, signalled that he will not use a lack of progress in boosting Japan's potential growth as an excuse for not achieving the central bank's inflation target.

"The bank's mission to ensure price stability remains unchanged irrespective of the level of the potential growth rate," he said.

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The BOJ has kept policy steady since deploying an intense burst of stimulus in April last year, when it pledged to double base money via aggressive asset purchases to accelerate inflation to 2 percent in roughly two years.

Kuroda said that while the economy was recovering moderately and making steady progress in emerging from deflation, it was still "half way through" meeting the BOJ's price target.

He also warned that a rebound in now-stagnant exports, fuelled by a recovery in overseas growth, was key for Japan to achieve the central bank's upbeat economic scenario.

"There remain various uncertainties regarding the outlook for overseas economies, which all warrant vigilance," he said, pointing to excess capacity weighing on Chinese economic growth, high inflation plaguing some emerging economies and looming geo-political risks.

(Editing by Chris Gallagher and Richard Borsuk)

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