BOJ chief Kuroda says 'no
reason' to withdraw stimulus now
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[March 24, 2017]
By William Mallard and Leika Kihara
(Reuters) - Bank of Japan Governor Haruhiko Kuroda said there is "no
reason" to raise the bank's bond yield targets now with inflation so far
from its 2 percent target, offering his strongest denial to date of the
chance of withdrawing its massive stimulus any time soon.
The former top Japanese currency diplomat also played down the risk that
President Donald Trump's administration will lean toward excessive
protectionism since the global community, including the United States,
benefits from free trade.
While Japan's economy was slowly recovering, it still lacked enough
momentum to quickly boost inflation to the BOJ's target, Kuroda said,
adding that risks to both the growth and price outlooks were skewed to
"There is no reason to reduce the level of monetary accommodation in
light of current economic and price developments," Kuroda told a Reuters
Newsmaker event on Friday.
"I don't think we need to raise our interest-rate targets now," he said.
"It's unclear whether inflation will hit our 2 percent target before my
term ends next April."
Japan's long-stagnant economy has shown signs of life in recent months,
with exports and factory output benefiting from a recovery in global
Core consumer prices are expected to rise in February at the fastest
pace in nearly two years, a Reuters poll showed, and many analysts
project inflation to approach 1 percent later this year.
That has led to a dramatic shift in market expectations, with a majority
of analysts polled by Reuters predicting the BOJ's next move would be to
scale back stimulus, possibly as early as the second half of this year.
Some analysts say the BOJ may be forced to raise its yield targets to
avoid ramping up bond purchases if Japanese long-term interest rates
track global bond yield rises, which are being driven by expectations of
higher U.S. interest rates.
Kuroda said the BOJ may debate raising its interest-rate targets if
Japan's inflation accelerates sharply in the future.
But he said the central bank won't increase its bond yield targets just
because overseas long-term interest rates were rising, or in response to
rises in a single price indicator.
"When deciding on monetary policy, we must look at the underlying trend
of inflation ... We won't change monetary policy just because oil price
rises push up inflation," he said.
The BOJ also sees no immediate need to scale back the pace of purchases
of its exchange-traded funds (ETFs), Kuroda added, shrugging off
speculation it could reduce buying as Japanese stock prices were on a
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Bank of Japan Governor Haruhiko Kuroda speaks during a Reuters
Newsmaker event in Tokyo. REUTERS/Toru Hanai
"The comments confirmed our view that a hike in the BOJ's long-term rate
target is unrealistic for now," said Makoto Yamashita, chief bond
strategist at Deutsche Securities.
Under a policy framework aimed at controlling the yield curve, the BOJ
guides short-term interest rates at minus 0.1 percent and 10-year
government bond yields around zero percent via aggressive asset
PROTECTIONISM RISK EXAGGERATED
Kuroda said the global economic recovery is gaining momentum with U.S.
business confidence improving sharply on hopes for growth-boosting
policies from Trump's administration.
"It's obvious the BOJ should maintain the current yield curve and make
the most of improvements in the global economy," Kuroda said, stressing
his resolve to maintain an ultra-easy bias even as the U.S. Federal
Reserve hikes interest rates.
Underscoring Kuroda's optimism, Japanese manufacturers' business
confidence hit a three-year high in March.
But a business survey suggested manufacturing activity expanded at a
slightly slower pace in March than in February, highlighting the fragile
nature of the recovery as fears of Trump's "America first" streak cloud
G20 finance leaders dropped a pledge to keep global trade free and open
at last week's gathering in Germany, acquiescing to an increasingly
protectionist United States.
Kuroda, who attended the G20 gathering, said it was hard to judge
Washington's stance on trade yet with no concrete policy steps taken by
"What I can say is that the media is portraying this as a U.S. shift to
protectionism the G20 was forced to accept," which was not the case,
"If you look at the contents of the G20 communique, it does not show
that we shifted to protectionism and away from free trade, or that we
accepted U.S. demands."
(Additional reporting by Stanley White; Editing by Chris Gallagher and
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