BOJ's Kuroda sees no big
rise or fall in bond buying for now
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[September 26, 2016]
By Leika Kihara
OSAKA
(Reuters) - The pace at which the Bank of Japan buys bonds will depend
on what is needed to achieve its yield curve target but no big increases
or decreases were expected for now, Governor Haruhiko Kuroda said on
Monday, dampening speculation that the BOJ was considering tapering
asset purchases.
Kuroda, in his first speech since the BOJ's decision last week to reform
its radical stimulus program, said the central bank stood ready to use
every available tool to achieve its 2 percent inflation target.
On Wednesday, the BOJ dropped its previous target of increasing base
money at an annual pace of 80 trillion yen ($792 billion), a move
analysts saw as an acknowledgement that its huge bond buying program was
reaching its limits.
The BOJ may instead top up asset purchases or accelerate base money
expansion to push down borrowing costs sharply, if economic and price
conditions warranted such "powerful" monetary easing, Kuroda said in a
speech to business leaders in Osaka, western Japan.
Such changes in the amount of bond purchases would have no policy
implications, he noted.
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While the BOJ would be mindful of the impact ultra-easy policy could
have on banks' profits, that would not prevent it from expanding
stimulus if needed to revive Japan's economy.
"There is no better opportunity than now to completely get out of
deflation. Talking about the limits of monetary policy does not help at
all," Kuroda said.
The BOJ made an abrupt shift last week to targeting interest rates on
government bonds to achieve its elusive inflation target, after years of
massive money printing failed to jolt the economy out of decades-long
stagnation.
Under a new "yield curve control" (YCC) framework, the BOJ's main means
for monetary easing would be to deepen negative interest rates from the
current minus 0.1 percent, or lower its 10-year government bond yield
target - now set at around zero percent, Kuroda said.
While the BOJ's move to target a specific government bond yield
surprised market watchers, some economists said something much more
ambitious is needed to break Japan out of deflation.
The 10-year bond yield has briefly slipped below zero percent since
Wednesday's decision, leaving markets wondering whether the BOJ would
reduce its bond buying to prevent the yield from falling further away
from its target.
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![](../images/092616pics/busine35.jpg)
Bank of Japan (BOJ) Governor Haruhiko Kuroda attends a news
conference at the BOJ headquarters in Tokyo, Japan, September 21,
2016. REUTERS/Toru Hanai
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Kuroda
said daily moves in 10-year yields would not have much effect on the BOJ's
policy, stressing the importance of guiding the entire yield curve to a
desirable shape.
"Unlike short-term rates, central banks cannot completely control long-term rate
moves," Kuroda said. "I don't think recent moves in long-term yields have raised
doubts about the BOJ's ability to control the yield curve."
Several corporate executives present at the meeting complained about the yen's
recent ascent to a one-month high, saying that it could hurt their
export-reliant businesses.
Kuroda said he would watch closely how recent yen gains could affect Japan's
economy, and warned of lingering overseas uncertainties that could cloud
prospects of Japan's recovery.
"It's basically desirable for currency rates to move stably reflecting economic
fundamentals," Kuroda said, stressing that it was a shared understanding among
Group of 20 nations that excess volatility and disorderly currency moves hurt
growth.
(Reporting by Leika Kihara; Editing by Chang-Ran Kim and Eric Meijer)
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